Packaging & Speciality Paper delivers first-class kraft and sack paper to a growing and demanding market. 2010 was a successful year for the business area, with a greater shift in position towards brand owners and the launch of new sustainable packaging solutions.

business area Packaging & Speciality Paper

Strong customer relations and products right on trend

OFFERING

Packaging & Speciality Paper is responsible for sales of two of Billerud’s product categories: primary fibre-based kraft paper and sack paper. In addition, customers are offered packagingoptimising services and solutions, with a focus on material choice, function, design and sustainability.

MARKET SHARE – globally		MARKET SHARE – Europe
WHITE SACK PAPER – MARKET LEADER	BROWN SACK PAPER – MARKET LEADER IN HIGH-POROSITY PAPER	UNCOATED WHITE MG – MARKET LEADER	UNCOATED WHITE MF – SECOND LARGEST MARKET SHARE
25%	4%1)	25%2)	24%
Size: 430 000 tonnes Source: CEPI Eurokraft 2010, Billerud	Size: 3 900 000 tonnes Source: CEPI Eurokraft 2010, Billerud	Size: 450 000 tonnes Source: CEPI Eurokraft 2010, Billerud	Size: 230 000 tonnes Source: CEPI Eurokraft 2010, Billerud
White sack paper is strong and is ideal when good printability is required, for example for powdered building materials for the DIY market.	Brown sack paper is used primarily for powdered products such as cement, where the paper needs to be strong and highly porous.	MG paper is a kraft paper with one matt and one glossy side, which is excellent for medical purposes, foods such as bread and Release Liners – silicon base paper for stickers and labels.	MF paper is a kraft paper that is matt on both sides. It is used in contexts where the strength of the paper is paramount, for example in carrier bags and in packaging for flour and sugar.

Packaging & Speciality Paper had a very good year. Operating profit for the year was SEK 417 million, an increase of 8% compared with the previous year. A less favourable currency situation and increased costs were compensated by improved prices in local currency and higher delivery volumes. The operating margin was 10% (10).

Offering

Packaging & Speciality Paper is responsible for sales of two of Billerud’s product categories: primary fibre-based kraft paper and sack paper.

The kraft paper is used primarily for food and consumer packaging, carrier bags, sterile medical packaging, silicon base paper for stickers, interleaving paper for steel and metal plus several other niche areas. Primary fibre-based kraft paper provides efficient packaging manufacture, good printability and strong, hygienic packaging.

High-porosity sack paper is used mainly for powdered products for the construction industry such as cement and plaster, but also for industrial minerals, chemicals and bakery products such as flour and sugar. Strong, high-porosity sack paper provides major material savings, reduced material loss in conjunction with filling and distribution, faster filling processes and a dust-free work environment. Another advantage is that the sacks are filled evenly, which makes handling easier along the logistics chain.

Value-adding services and solutions

Packaging & Speciality Paper also offers services and solutions aimed at generating increased sales and profitability for the customer.

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Around the beginning of 2010 a new sales organisation, Sustainable Packaging Solutions (SPS), was established with a view to increasing the business area’s focus on end-customers. Over the year, SPS has helped brand owners with their development of innovative consumer packaging solutions and successfully launched Billerud FibreForm^® on the market together with partners in the conversion business.

Development centres add value

Pack Lab, Seal Lab, Barrier Lab and Sack Lab help customers and brand owners to improve packaging manufacturing, packaging quality, sales of the end-product and profitability.

Pack Lab assesses the strength and performance of carrier bags and other consumer packaging solutions, develops packaging designs and produces prototypes with attractive properties. Seal Lab’s services give manufacturers of medical items a better seal in packaging where paper is combined with plastic film. Barrier Lab brings longer life to products with improved barrier properties in packaging. Sack Lab optimises all stages relating to sack function along the value chain.

In addition to the services of the development centres, Billerud also shares its knowledge with packaging manufacturers and brand owners by arranging seminars and courses on the importance of material choice in the performance of packaging.

Nine TPP and Billerud Tenova

Billerud has joined forces with design agency No Picnic to form Nine TPP, with a view to improving knowledge about the sales value of packaging and its role in strengthening brands. With Nine TPP, Billerud has managed to bring expertise in material choice, packaging, design, brand exposure and logistics under one roof.

As a complement to Billerud’s renewable packaging paper, the company now also offers biodegradable plastics and biobarriers via Billerud Tenova. The combination of paper and bioplastic paves the way for new environmentally neutral packaging solutions.

customers

The majority of the business area’s customers are packaging manufacturers who convert the paper to packaging and sell their products on to brand owners. In some industries, the paper is delivered directly to the brand owner, who both manufactures the packaging and packages the goods. The latter group includes manufacturers of medical consumables, integrated cement industries with their own sack production and sugar, grain and flour producers, who manufacture the packaging and pack the products in the same process, known as form, fill & seal packaging.

Factors driving demand

Sales in Packaging & Speciality Paper are driven by a number of trends in the packaging market – increased demand for product optimisation and sustainability, plus an increased focus on product differentiation and product safety.

Stronger and lighter paper

The market’s focus on product optimisation is increasing and Billerud’s kraft and sack papers are meeting this demand. The products offer excellent functionality in modern production lines, with packaging manufacture both cost-effective and reliable. At the same time, the strength of the paper makes it possible to use less of the material in the packaging while maintaining or improving performance. Lighter packaging also plays a role in transport optimisation. In addition, Billerud’s Sack Lab and Pack Lab are on hand to help customers with material choices and designs.

Paper prioritised

The prioritising of renewable materials over fossil plastics and a tightening of legal requirements in several markets, particularly for carrier bags but also in packaged food, provide good opportunities for kraft paper to make further gains as a packaging material in Europe. Billerud’s position is strengthened by its focus on developing renewable materials that are a competitive alternative to fossil plastics, for example Billerud FibreForm^® and bioplastics.

Greater focus on product differentiation

Brand owners and packaging manufacturers require attractive and innovative packaging that best promote products and brands. Billerud’s kraft paper strengthens the sale of consumer products, while Billerud’s white sack paper with its good printability is ideal for DIY products, where appearance is a key sales factor. Billerud also offers design services, for example through Nine TPP.

Clean and safe paper

There are strict hygiene and product safety standards for medical paper and food packaging – standards that Billerud’s primary fibre-based paper meets.

Billerud’s new sack concepts extend the life of powdered products and have been specially developed for the growing DIY market.

Market

Kraft paper

The market for kraft paper, which is used for consumer products among other things, is relatively consolidated when it comes to carrier bags as well as packaging for sugar and flour, but is more fragmented for MG paper. In Europe, Billerud is the largest producer of uncoated white MG and the second largest in uncoated white MF.

Billerud’s kraft paper is very popular in Europe. The Eastern European market remains limited, but there is great potential for growth as the economy recovers and more credit is made available. There is also potential for further sales in Asia, where fossil plastics currently have a dominant position as a packaging material for consumer products.

Sack paper

The applications for Billerud’s sack paper are dominated by building materials, industrial minerals and chemicals, which account for around two thirds of sack paper sales.

Most of Billerud’s white sack paper is sold on the European market. Billerud is the biggest producer of white sack paper in Europe and globally.

Around 70% of Billerud’s range of brown sack paper is sold in growth regions outside Europe, with North Africa and South-East Asia dominating. In these markets, cement is usually filled in 50 kg sacks in high-speed filling machines, which demands high levels of strength and functionality from the paper during filling, handling and distribution. The company’s brown sack paper is of the highest quality and in this segment Billerud has a leading position globally.

Strategy

Packaging & Speciality Paper’s ambition is to continuously develop and offer new materials, solutions and services that provide added value for customers. An improved product mix in markets with high demand and profitability is a strategic priority.

Innovation work maintains a focus on sustainable materials that improve the performance and attractiveness of the packaging, and on seeking new ways to integrate packaging with the product and increase its usability. This work is carried out in close collaboration with the market’s stakeholders. Billerud’s packaging materials will always promote sustainable development and back up the customer’s own environmental work.

Knowledge transfer and seminars

Through knowledge transfer and good relations, Billerud is able to reach further along the value chain. Several seminars were organised over the year to improve industries’ packaging knowledge. A major event was held in June for the sugar, grain and flour packaging segment and in spring Billerud brought the Asian sack industry together in Indonesia.

Sustainable Packaging Solutions

Over the year, the business area’s new sales organisation, Sustainable Packaging Solutions (SPS), helped brand owners with their product development and successfully launched Billerud FibreForm^® on the market together with partners in the conversion business.

Billerud FibreForm^®

Billerud FibreForm^® is a paper with unique elasticity that enables it to replace other packaging materials, not least fossil plastics, in various areas. Launched in 2009, Billerud FibreForm^® attracted a great deal of interest from customers and end-customers over the year.

Marks & Spencer chooses billerud fibreform® Over the year, customers and end-customers have shown great interest in Billerud FibreForm®, which also won several awards. Consumer packaging is an enormous and growing market. Paper accounts for only 12% of the flexible packaging market in Europe.* And yet 87% of consumers in Europe prefer paper over plastic for their packaging.** There is thus great demand for a higher proportion of paper in consumer packaging. Billerud FibreForm®, which was only launched last year, has already won several awards and been recognised as an alternative to plastics offering a premium look. The packaging manufacturers and brand owners who now want to switch to Billerud FibreForm® can do so without costly investment in new machinery. For the first time, paper can be used in thermoforming machines, a very common type of packaging equipment for fresh foods such as sliced meats. The market for thermoformed plastic in Europe amounts to around 1.6 million tonnes per year, which offers large potential for Billerud FibreForm®. The first to choose Billerud FibreForm® as a packaging solution was the respected British food chain Marks & Spencer, which packs its organic Yorkshire ham in the unique paper. After Marks & Spencer’s launch, several other important supermarkets chose Billerud FibreForm® for sliced meats. “Marks and Spencer are delighted to have launched this first-to-market innovation in packaging with Billerud. The FibreForm Packaging provides a premium look to our ham and is constructed from sustainable FSC sourced paper. It is important to Marks & Spencer to work with innovative solution providers to develop packaging for the future and Billerud has supported our innovation work through their proactive approach,” says Mark Caul, Packaging Technologist at Marks & Spencer. Source: *PCI, **IPSOS 2007 Picture from Marks & Spencer