Consumer Packaging in Poland, Czech Republic and in Moscow Area

Jari Makkonen, Jaroslava Habstová, Josef Král, Ewa Kicinska, Juha Rautalahti, Dmitri Makolkin, Tarja Päivärinne, Antti-Jussi Heilala

Technology Review 212/2007 Consumer Packaging in Poland, Czech Republic and in Moscow Area

Technology Review 212/2007

The Finnish Funding Agency for Technology and Innovation Kyllikinportti 2, P.O. Box 69, FIN-00101 Helsinki, Finland Tel. +358 1060 55000, Fax +358 9 694 9196, E-mail: [email protected] www.tekes.fi

ISSN 1239-758X August 2007 ISBN 978-952-457-378-8 Consumer Packaging in Poland, Czech Republic and in Moscow Area

Editors Jari Makkonen, Jaroslava Hobstová, Josef Král Finpro Czech Republic Ewa Kicinska, Juha Rautalahti Finpro Poland Dmitri Makolkin, Tarja Päivärinne Finpro Russia Antti-Jussi Heilala Finpro Forest Cluster Industry

Technology Review 212/2007 Helsinki 2007 Tekes, the Finnish Funding Agency for Technology and Innovation

Tekes is the main public funding organisation for research and development (R&D) in Finland. Tekes funds industrial projects as well as projects in research organisations, and especially promotes innovative, risk-intensive projects. Tekes offers partners from abroad a gateway to the key technology players in Finland.

Technology programmes – Tekes´ choices for the greatest impact of R&D funding

Tekes uses technology programmes to allocate its financing, networking and expert services to areas that are important for business and society. Programmes are launched in areas of application and technology that are in line with the focus areas in Tekes’ strategy. Tekes allocates about half the financing granted to companies, universities and research institutes through technology programmes. Tekes technology programmes have been con- tributing to changes in the Finnish innovation environment for twenty years.

Copyright Tekes 2007. All rights reserved. This publication includes materials protected under copyright law, the copyright for which is held by Tekes or a third party. The materials appearing in publications may not be used for commercial purposes. The contents of publications are the opinion of the writers and do not represent the official position of Tekes. Tekes bears no responsibility for any possible damages arising from their use. The original source must be mentioned when quoting from the materials.

ISSN 1239-758-X ISBN 978-952-457-378-8

Cover picture: Kylmäankka design, Anton Kalland Page layout: DTPage Oy Foreword

Tekes has been preparing a technology programme around the theme of packaging during the year 2007 under the name Pakkaus 2015 – Packaging 2015. The CAGR of the global packaging markets is ca. 4% by the year 2010, but there are clear regional differences. In Europe and USA the CAGR is 2 % whereas in Asia it is ca. 6 % and in Eastern Europe 7%. Although there are many global common trends in the packaging markets, packages and packaging at the very same time are eminently dependent on cultures and regions.

This report of the Eastern Europe’s consumer packing markets has been done as a part of the prepa- ration of the technology programme. The report has been carried out in co-operation with Finpro. The focus regions were Czech Republic, Poland and Moscow area in Russia and they were chosen because of both its geographically attractive location and strong market potential. The report includes e.g. reviews of the consumer packaging markets, trends and regional legislation concerning packages as well as some highlights of the product safety and anticounterfeiting.

The Eastern Europe’s consumer packaging markets offer many opportunities and challenges, which has to be taken into account simultaneously. Global competition is tightening. In order to be a successful company one has to know the cultural heritage as well as the market mechanisms of the regions profoundly.

Tekes would like to sincerely thank Finpro and its Eastern Europe’s experts for their input. We be- lieve that this report is a good basis for possible further studies and actions concerning consumer packaging markets in Eastern Europe.

Helsinki, July 2007

Tekes – The Finnish Funding Agency for Technology and Innovation Table of Contents

Foreword 1 Executive Summary...... 1 2 Role of Packages in a Changing Society. New needs and applications on the market, weak signals ...... 2 2.1 Poland ...... 2 2.2 Czech Republic ...... 2 2.3 Moscow Area ...... 2 3 Consumer Packaging Market in Poland ...... 3 3.1 Description of the consumer packaging market in Poland ...... 4 3.2 Competition on the Consumer Packaging Market...... 8 3.3 Local Trends in the Consumer Packaging Market ...... 9 3.4 Players in the consumer packaging value chain ...... 11 3.5 Local Regulations Affecting the Use of Packages ...... 15 3.6 Product Safety and Packages ...... 15 4 Consumer Packaging Market in Czech Republic...... 17 4.1 Description of the Consumer Packaging Market in CZ ...... 18 4.2 Competition on the Consumer Packaging Market...... 23 4.3 Local Trends in the Consumer Packaging Market ...... 24 4.4 Players In the Consumer Packaging Value Chain ...... 25 4.5 Local Regulations Effecting the Use of Packages ...... 31 4.6 Product Safety and Packages ...... 32 5 Consumer Packaging Market in Russia ...... 34 5.1 General Economic Situation in Russia ...... 34 5.2 Description of the Consumer Packaging Market in Russia ...... 36 5.3 Basic Segmentation of the Consumer Package in Russia...... 38 5.4 Packaging Design ...... 44 5.5 Marketing and Distribution Channels...... 44 5.6 Requirements of End Users ...... 45 5.7 Package Recycling...... 45 5.8 Competition on the Consumer Packaging Market...... 45 5.9 Local trends in the Consumer Packaging Market (in relation to development of the society) ...... 46 5.10 Players in the Consumer Packaging Value Chain ...... 46 5.11 Local Regulations Effecting the Use of Packages ...... 48 5.12 Package as a Tool against Product Frauds ...... 49 6 Vision of the Packaging Market in Eastern Europe ...... 50 Tekes‘ Technology Reviews in English...... 51 1 Executive Summary

Consumer packaging market in Eastern Europe is growing ● Development of ecological packaging appropriate for strong. The lower the usage of packages is, the higher is the secondary processing (cardboard, glass, metal) or reuse expected growth. In Russia the usage of packages per ca- (returnable packaging) – in line with adopted pro-eco- pita is about 80 kg. In Poland about 92 kg and in Czechia logical regulations about 83 kg.( In Finland over 400 kg) This means that the ● There is a growing demand for glass bottles as a result of growth potential is biggest in Russia and Czechia in terms growing beer consumption and almost non-profitable of absolute volume and in terms of usage per capita. production of cans (increasing aluminum prices) ● Development of new plastic, paper and laminated card- The market in Eastern Europe is developing partly based board packaging as a result of their qualities on own tradition and partly based on European and global ● trends. The following facts and features describe the situa- Growing role of re-use packaging for ecological and tion today in many Eastern European countries: economical (savings) reasons ● Flashy and shiny, eye-catching look of packaging is – Huge changes in the quality of packaging and func- even a must for consumers (ecological or ecologically- tions conducted by packaging looking packaging is not appreciated because it looks as – Further development from the protective to market- cheap, not-processed); consumers like exclusive look, ing function of packaging embellishments, platings – Increasing role of packaging in logistics system (in- ● Functionality is more and more appreciated by consum- formation about the content and way of use) ers (e.g. multi open-close packaging of hard cheese in ● slices, drinkable youghurts in plastic bottles) Adaptation of plastic packaging for re-processing / recycling ● Preference for small-portion packages with convinience food grows as a result of growing number of single-per- ● Deepening integration of international players son households ● Gradual decrease in the wrapping weight while keeping ● Especially Polish consumers are used to colorless glass the utility parameters of the packaging used ● Growth of packaging business by 5–20% yearly by 2010 ● Continuous increase in emphasizing environmental as- as a result of: pects – Fast economic growth ● High portion of package consumption by food & to- – Low packaging consumption per capita as compared bacco industry (currently some 70%) to further continue to old EU countries ● More comfortable way to open and a possibility to – Growing food packaging market as a result of grow- re-close/re-cap the packaging ing local consumption ● Smaller portions/amounts of specific goods per a pack- ● Plastics packaging sector is forecasted to have the high- age required by consumers est production growth ● Recycling / re-processing of food packages. ● Demand for packaging will grow, however the demand ● Product safety is a high priority also in all Eastern Euro- for certain types of packaging will differ: the highest de- pean countries. mand rise will be noted in single plastic packaging and the lowest in wood and metal packaging The consumer packaging market situation in Poland and ● Concentration of the production i.e. limitation of the Czechia follows the development of old EU member states. number of producers and their constant relations with In Russia the market is more challenging because the EU their regular suppliers regulations do not apply in Russia.

1 2 Role of Packages in a Changing Society. New needs and applications on the market, weak signals

2.1 Poland ● Easy-to-open packages, re-close and re-cap packaging ● Bio-degradable packages. What Changes are happening on the market? ● Changes in the material structure of packaging con- What problems are there with packages sumption (growing role of Plastic as well as paper and on the market? cardboard packaging) ● Overcapacity for some packaging (necessity to focus on ● Changes in the functions of packaging (growing market- export) ing function) ● Growing prices of packaging raw material ● Considerable growth of the market ● Relatively high saturation of the market with well-estab- ● Concentration of the production. lished international players. What kind of new packages are there on the market? ● The most commonly known “intelligent” packaging are labels reacting on temperature used by some beer pro- 2.3 Moscow Area ducers ● Recently has appeared on the market sleeve technology The main changes at the market are determined by the stage packaging i.e. covered by heat-shrinkable film with of the package industry development. Market is constantly overprint (this technology allows for printing on the growing, and the companies are interested to start new pro- whole packaging area of any shape) duction facilities. ● New, interesting shapes of packaging appear on the market e.g. Vodka Exquisite (http://www.wyborowa.com/ Special interest is to the modern package materials that range.php) have new properties in the storage of the products (food ● Beverage cardboard packaging of slim type appeared on products), like better barrier functions that extend the shelf the market two years ago and gained the market life. ● Sport-cap bottles used for mineral water or beverages for kids New at the market are: ● Multi open-close packaging for hard cheese in slices. ● Package of the individual design that makes the packed product different from the competing products. What problems are there with packages ● Modern multilayer plastic materials that extend the shelf on the market? life. ● Rising prices of raw materials causing increase of pack- ● First examples of the materials that are easy for recy- aging price. cling or are biodegradable. ● Convenient package of food products that can be closed to store the unused part of the content. 2.2 Czech Republic The opportunities can be found in the area of new package materials with enhanced protection properties, both for the What changes are happening on the market? materials itself and technologies of production of such ma- ● Market concentration, accumulation and crystallization terials and equipment that can utilize such materials. processes of the same type as in developed (Western Eu- ropean) countries. Biodegradable package materials technologies can become of big demand as soon as the corresponding law will be de- What kind of new packages are there on the market? veloped and adopted, this situation requires monitoring to ● Packaging with application of Braille format follow the latest changes in the legislation.

2 3 Consumer Packaging Market in Poland

Information about Poland

Population: 38.1 million Capital: Warsaw, population: 1.7 million Currency: Polish zloty, 1 EUR = 3.9028 PLN

Polish economy in 2006

GDP: 1046.6 bn PLN (~336 bn USD) GDP per capita : 8857 USD GDP growth: 5.8 % Inflation: 1.0 %

Agriculture Industry 3% 32%

Services 65% GDP Structure

3 3.1 Description of the Consumer Segmentation of packaging materials and Packaging Market in Poland packages Segmentation of packaging materials ● The value of the Polish packaging market was estimated ● Paper at EUR 3.9 billion in 2006 (approximately 1% of the ● Plastics world packaging market) ● Glass ● Estimated in tons, packaging market was estimated at ● Metal 3.5 million tons in 2005 ● Wood. ● The packaging sector generated 2.2% of Poland’s GDP in 2006 Segmentation of packaging ● Average yearly growth of packaging market reached Paper and board packaging 4-6% in the years 2001–2006 ● ● There are approximately 5 000 companies dealing with Market share of paper and board packaging remained production and distribution of packaging, packaging constant (small growth from 25.6% in 2000 to 26.2% in materials, equipment for packing and packaging produc- 2006), whereas the value of paper and board packaging tion increased from EUR 0.65 billion in 2000 to EUR 1.02 ● In 2006, the consumption of packaging per capita billion in 2006 ● amounted to EUR 102 (as compared to EUR 266 in old Paper and board packaging is used for dry and loose EU countries) in terms of money and 92 kg in terms of foodstuffs ● weight Paper and board packaging, especially corrugated board ● Packaging market is forecasted to reach the value of is the specialty of Polish paper industry ● EUR 6 billion in 2010 Paper and board coated by plastics as well as packaging ● Competition on packaging market grows from multilayer laminates on the basis of cardboard, plastics and aluminium are used for juices, milk and veg- ● Production capabilities exceed the current demand in the case of many packaging sectors (30% of produced pack- etables. aging is exported, the biggest client being the German Plastic packaging market). ● Polish market is dominated by plastic packaging ● It is the most dynamically growing sector ● Market share of flexible plastic packaging grew from 3.1.1 Basic segmentation 11.4% in 2000 to 16.4% in 2006, whereas the value of Segmentation of consumer goods flexible plastic packaging grew from EUR 0.3 billion to EUR 0.57 billion respectively According to the COBRO (Polish Packaging Research and ● Market share of rigid plastic packaging grew from Development Center) more than 60% of packaging is used 17.4% in 2000 to 22.2% in 2006, whereas the value of for foodstuffs and beverages and that is why packaging for rigid plastic packaging grew from EUR 0.44 billion to this sector develops the most dynamically. EUR 0.86 billion respectively

Packaging for cosmetics 3 % Packaging for other Packaging products for foodstuffs 16 % 40 %

Packaging for pharma industry & hygienic goods 4 %

Packaging Packaging for beverages for industrial 15 % goods 22 % Figure 3.1. Segmentation of Consumer Goods (Non-food and Food) according to the Polish Chamber of Packaging.

4 ● Quality of plastic packaging produced in Poland does – beverages and beer not differ from the European level but the assortment is – meet, fish, vegetable and fruit preserves not so wide as in Western European markets (e.g. there – more luxury foodstuffs such as high-quality tea or is no production of preforms for PET bottles of high ox- confectionery products ygen and carbon dioxide barriers for beer bottling) – aerosol packaging. ● Sector of plastic packaging production is higly fragmented and highly competitive. Wood packaging Glass packaging Market share of wood packaging decreased from 3% in 2000 to 1.9% in 2006 and the value of wood packaging de- ● Market share of glass packaging decreased from 14.5% creased from EUR 0.08 billion to EUR 0.07 billion in 2000 to 9.5% in 2006 and the value of glass packaging repsectively. also decreased from EUR 0.37 billion to EUR 0.34 billion respectvely ● Glass packaging is replaced by light packaging from pa- 3.1.2 Packaging design per and plastics ● Glass packaging mainly includes bottles (50% of pro- ● Packaging is most commonly designed in the factories, duction) and jars (30% of production), and other: small where it is produced jars for mustard, cosmetics and pharmaceuticals (20% of ● Big corporations having international brands conduct production) the process of packaging adaptation to local regulations; ● 80% of produced glass packaging is made of colorless when having freedom to create packaging formats their glass (Polish consumers are used to colorless glass) R&D department together with suppliers create formats ● Glass packaging is used mainly for high-percentage al- that are later tested by marketing department (consumer cohol, wine, beer, premium segment juices, baby food, tests) vegetable-fruit preserves as well as vegetable-meet pre- ● Packaging design is also conducted by specialized com- serves. panies or independent graphics, these companies are also used by big corporations for e.g. overprint design Metal packaging ● There are more than 10 agencies specialized in packag- ● Market share of metal packaging decreased from 28.1% ing design. in 2000 to 23.8% in 2006, whereas the value of metal packaging slightly grew from EUR 0.72 billion 2000 to EUR 0.91 billion respectively Packaging design process in specialized ● Metal packaging is replaced by plastic packaging design companies ● Segment includes mainly ● Selection of design agency – packaging from aluminum sheets (cans fro beverages ● Client/Brand Owner provides brief (set of assumptions and preserves) and marketing tips that set the direction of packaging de- – packaging from tinned steel sheet (cans for preserves) sign) usually to a few design agencies and asks for quo- – packaging from aluminum foil tation ● Metal packaging is used mainly for

Wooden packaging Packaging from Wooden Packaging from Glass 1,90% paper and Glass packaging paper and packaging cardboard packaging 1,90% cardboard Metal 9,60% 25,80% Metal 9,50% 26,20% packaging packaging 25% 24%

Flexible Rigid Flexible Rigid packaging packaging from packaging from packaging from from plastics plastics 22% plastics 16,40% plastics 23% 15,70%

Figure 3.2. Material structure of packaging Figure 3.3. Material structure of packaging consumption in 2005. consumption in 2006.

5 ● Initial research conducted by selected company before ● Selection of the final design beginning the design phase ● Client conducts consumer research concerning the pack- ● Initial research concerning competitive products (visual aging (ordered from specialized market research compa- look and positioning) nies). ● Creation of a few packaging design proposals (based on brief and initial research) and their presentation to the client

3.1.3 Marketing and distribution channels

IMPORTERS/ REPRESENTATIVES OF LOCAL PRODUCERS OF FOREIGN MANUFACTURERS CONSUMER GOODS OF PACKAGING AND PACKAGING RAW MATERIAL

LOCAL MANUFACTURERS OF RETAILERS PACKAGING AND PACKAGING RAW MATERIAL

END USERS/ BUYERS OF CONSUMER GOODS

Typical marketing channel

Complementary marketing channel

Figure 3.4. Marketing channels in packaging business.

FOREIGN MANUFACTURERS OF PACKAGING RAW MATERIAL

IMPORTERS/ LOCAL MANUFACTURERS REPRESENTATIVES OF PACKAGING AND OF FOREIGN PACKAGING RAW MATERIAL MANUFACTURERS

LOCAL PRODUCERS OF CONSUMER GOODS

RETAILERS

END USERS/ BUYERS OF CONSUMER GOODS

Figure 3.5. Distribution channels – flow of products (new packaging).

6 Producers of packaging

Importers/ local producers of products in packaging

Consumers/ Retailers End-users

Recovery Organizations

Collection Companies

Recycling

Figure 3.6. Flow of waste (used packaging).

3.1.4 Trade fairs ● Easy to handle products: RTS products where external (transportation) packaging is eliminated or easy to re- ● PAKFOOD, Packging Fair for Food Industry, move 17-20.09.2007 Poznań ● Omnibus packaging adapted to the shelf/display param- ● POLAGRA-TECH, International Food Technologies eters Fair, 17-20.09.2007 Poznań ● Easy identification of the products both in the store warehouse and on the shelf. ● PLASTPOL, Plastics Products Fair, 29.05.-01.06.2007 Kielce ● RUB EXPO 2007, Rubber Industry Fair, 25-27.09.2007, Consumers Sosnowiec ● Flashy and shiny, eye-catching look of packaging is ● POLEKO 2007, International Ecological Fair, even a must for Polish consumers (ecological or ecologi- 20-23.11.2007, Poznan cally-looking packaging is not appreciated because it ● GASTRO-TECH 2007, Fair of Gastronomy and Food looks as cheap, not-processed); consumers like exclu- Processing Technology and Equipment, 18-20.10.2007, sive look, embellishments, platings Kielce. ● Functionality is more and more appreciated by consumers (e.g. multi open-close packaging of hard cheese in slices, drinkable youghurts in plastic bottles) 3.1.5 Requirements of end users ● Preference for small-portion packages with convinience food grows as a result of growing number of single-per- Retailers son households ● Glass where alcohols are bottled must be transparent like ● Interested in RTS products (ready to sell/shelf) that can crystal i.e. cleaner than glass from Western European be exposed in group package and still have promo- glass works tion-marketing functions ● Polish consumers are used to colorless glass.

7 3.1.6 Packaging recycling in Poland 3.2 Competition on the Consumer Packaging Market Local requirements for the recycling of the package of different types Approximately 50% of the Polish packaging industry belongs to the foreign capital. The competition on the market Required recycling levels intensifies since the production capacity exceeds the de- Every year Poland as a country has to fulfill certain packag- mand and is used only in approximately 60%. ing recovery and recycling levels to fulfill EU requirements. Polish legal regulations by the Ministry of Environ- ment specify those recycling levels as shown in Table 3.1. 3.2.1 Leading players and their packaging-related products Producer’s responsibility Paper and board packaging producers The companies manufacturing or launching packed prod- ● Stora Enso Poland (5 plants) ucts to domestic market are obliged by legal regulations to ● Smurfit Kappa Poland (5 plants) recover packaging waste in the certain amounts. They can ● Mondi Packaging Paper Swiecie S.A. either do recovery and recycling of packaging themselves ● DS Smith Polska S.A. (2 plants) or transfer this obligation to waste recovery organizations ● Eurobox Polska Sp. z o.o. that can later prove that the certain amount of waste was ● Werner Kenkel collected from the market and directed to recyclers. ● Huhtamaki Poland Sp. z o.o. ● Esselte Polska Companies are also obliged to report to voivodship author- ● Polpak Karton Sp. z o.o. ities on the amounts of packaging introduced to the market ● Ultra Pack S.A. as well as recovered and recycled amounts. ● Amcor Flexibles Polska Sp. z o.o.

If the duty is not fulfilled the company manufacturing Plastics packaging producers packej products in packaging has to pay fines in certain ● Alpla Sp. z o.o. amounts (so called product fees) depending on the quantity ● CeDo Sp. z o.o. of packaging. Money gathered from fees is in 70% trans- ● Ergis Group Sp. z o.o. ferred to municipalities and are to be spent on organizing ● Huhtamaki Polska Sp. z o.o. the selective collection of packaging waste. ● Marflex – M.J. Maillis Poland Sp. z o.o. ● DGS SA There are 39 waste recovery organizations active on the ● Graham Packaging Poland Sp. z o.o. market. Their role is to secure for the producers/importers ● GTX Hanex Okastuc Sp. z o.o. of the packej goods the required recycling level. ● Eurofilms Polska Grupa Ergis SA

Table 3.1. Recovery and recycling levels for 2006 and 2007 obligatory in Poland.

Types of Packaging 2006 2007

Recovery (%) Recycling (%) Recovery (%) Recycling (%)

Packaging in total 43 - 50 25

Plastic packaging - 22 - 25

Aluminium packaging - 35 - 40

White sheet metal -18-20 packaging

Cardboard and paper -45-48 packaging

Industrial glass packaging -35-40 (excerpt for ampoules)

Natural material packaging -13-15 (wood and textile)

8 ● Amcor Flexibles Polska Sp. z o.o. Local specificities ● Sealed Air Polska Sp. z o.o. ● High level of concentration of the packaging production. Approximately 250 companies (from the total number of Metal packaging producers 5 000) are the leaders that provide 75% of the total pro- ● Asko Vogel & Noot Sp. z o.o duction ● Ball Packaging Europe Sp. z o.o. ● Currently, all most popular types of packaging except ● Can-Pack SA laminated cardboard, are produced in Poland ● ● DGS Sp. z o.o. Part of produced packaging is exported, mainly plastic, light metal (cans), paper and cardboard packaging ● Crown Packaging Polska Sp. z o.o. ● Imported are mainly plastic and laminated board packaging Glass packaging producers ● Poland is one of the biggest producers of glass packag- ● Owens-Illinois Poland (~40% market share) ing in Europe ● Warta Glass Group (~20% market share) ● Polish glass works are among most modern in the world ● Rexam Szklo Gostyn SA (~20% market share, and adopted to European standards (big share of the in- purchased by Ardagh Glass) dustry belongs to the foreign capital). ● Huta Szkla Ujscie (Ardagh Glass) ● Huta Szkla Stolzle Czestochowa ● Huta Szkla Orzesze (Can Pack) 3.3 Local Trends in the Consumer ● Huta Szkla Czechy Packaging Market ● Huta Szkla Slawa ● Huta Szkla Feniks 3.3.1 Anticipated overall trends

● Growth by 5–10% yearly by 2010 (acc. to the Polish 3.2.3 Competitive edge and Chamber of Packaging estimates) as a result of: local specificities – Fast economic growth (5.8% GDP growth in 2006) – Low packaging consumption per capita in Poland as Competitive edge examples compared to old EU countries – Growing food packaging market as a result of rising Selected winners of the Nationwide Packaging Competi- food export and growing local consumption tion PakStar, organized by the Polish Packaging Research and Development Centre. The winners of the competition ● Plastics packaging sector is forecasted to have the high- have often been also successful in the International Pack- est production growth (10% yearly growth recently – 5 aging Competition WorldStar. (Table 3.2) times higher as compared to old EU countries)

Table 3.2. Selected winners of the Nationwide Packaging Competition PakStar.

Producer Product User

OWENS ILLINOIS Polska Glass jam jar “Lowicz AGROS NOVA Sp. z o.o. Awarded in 2006, S.A. Jaros³aw Czeko Dzem” children friendly Zak³ad Produkcji Opakowañ Transparent PET boxes Awarded in 2006, “TUBUS” Sp. J. wide variety of use Coffee Service J.V. Stand-up pouches with a Awarded 2006, Sp. Z o.o. zipper for food products high functinality Heinz Glas Dzia³dowo ”Flame“ glass bottles for Awarded 2006, high Sp. Z o.o. perfumes quality, avant-garde design Lean Pack Air fluid Distributor: Ecolean Awarded 2004 products packaging Poland Sp. z o.o. OWENS ILLINOIS Tymbark Life Active Tymbark Awarded 2004 Polska S.A. beverages bottle Stabilo Seal type coffe Poznañska Palarnia Kawy Awarded 2004 and tea bag ASTRA Sp. z o.o.

9 ● Demand for packaging will grow, however the demand ● As an EU member Poland is obliged to fulfill the EU for particular types of packaging will differ: the highest norms regarding packaging recovery and recycling. demand rise will be noted in single plastic packaging and Therefore certain levels of recycling and recovery of the lowest in wood and metal packaging packaging waste are to be reached every year (e.g. as ● Concentration of the production i.e. limitation of the specified for 2006 and 2007 above). number of producers and their constant relations with ● Poland, as other accession countries was granted the their regular suppliers transition period till 2014 to reach the given final targets, ● Development of ecological packaging appropriate for common for the whole EU. Before that time the target secondary processing (cardboard, glass, metal) or reuse recycling levels are increased every year (targets are set (returnable packaging) – in line with adopted pro-eco- by the Ministry of Environment and published every logical regulations year). So far the targets set were well fulfilled in all kinds of packaging and even exceeded (according to the Min- ● Growing demand for glass bottles as a result of growing beer consumption and almost non-profitable production istry of Environment data). (Table 3.3) ● of cans (increasing aluminum prices), currently 40% of The collection system works well for the packaging beer is canned but it is forecasted that this share will be waste from trade and industry. Problems arise with diminishing in favor for bottles packaging waste from households – the system to collect them still does not function very well. ● Development of plastic, paper and laminated cardboard ● It can be expected that some development of the legisla- packaging as a result of their qualities tion will happen in the case of waste collection from ● Growing role of re-use packaging for ecological and households and responsibility of different subjects in economical (savings) reasons this issue since to reach the recycling levels required by – Huge changes in the quality of packaging and func- EU in nearest future Poland will have to improve the ef- tions conducted by packaging fectiveness of collection from households. – Further development from the protective to marketing function of packaging – Increasing role of packaging in logistics system (in- 3.3.2 Weak signals formation about the content and way of use) Intelligent and active packaging ● Adaptation of plastic packaging for re-processing Intelligent packaging is not well known in Poland. The ● Diminishing the use of raw materials in production (e.g. most commonly known “intelligent” packaging is label re- production of thin-walls glass packaging). acting on temperature used by some beer producers.

Packaging recycling target by 2014 Biodegradable packaging

● Perspectives of the local regulations development for re- New generation biodegradable material is produced by cycling as a part of the general regulation development, Biotrem. The material is used for the single-use packaging harmonization and adaptation to EU norms. such as cups and trays.

Table 3.3. Target recycling levels for 2014.

Types of packaging 2014

Recovery (%) Recycling (%)

Packaging in total 60 Not less than 55 and not more than 80

Plastic packaging - 22.5

Aluminium packaging - 50

White sheet metal packaging - 50

Cardboard and paper packaging - 60

Industrial glass packaging - 60

Natural material packaging (wood and textile) - 15

10 NNZ company produces two types of biodegradable nets Requirements of the different actors of that are produced with the use of starch. The company also the value chain produces two types of foil from starch. Packaging design companies ● Require clear specification/brief from consumer goods producers. 3.3.3 Challenges and threats Consumer goods producers In order to survive on the more and more competitive mar- ● ket, the companies will have to modernize the production More attention is given to hygienic-sanitary features of packaging and their influence on quality preserving as and put more attention to the quality, functionality and prowell as influence on packed products healthy features motion-marketing features of produced packaging. Con- ● The importance of promotion and marketing features of stant monitoring of the market as well as follow up of de- packaging as well as packaging functionality grows as a velopment trends (concerning packaging construction, result of growing competition and the development of used materials, production technology) will be necessary. self-service retail sales (the product should sell itself) ● Demand for single packaging grows as a result of devel- The growing trend of the oil price can create threat for the opment of self-service retail sales and diminishing sale expeditiously developing production of plastic packaging. of products sold behind the counter/sold by the weight ● The interest in original (unconventional) packaging allowing for distinguishing the products from the competitive ones can be observed 3.4 Players in the Consumer ● Packaging allowing for presentation of wider range of Packaging Value Chain products (beverage cardboard packaging of slim type) is appreciated. 3.4.1 Value chain of packaging industry

Value chain flow diagram

The blue boxes represent basic phases of value-adding in packaging process while the orange boxes list typical players related to the individual phases.

Packaging Packaging Consumer Packaging Packaging Raw Material Production Goods R&D Design Production (Converting) Packaging

● R&D ● Raw material ● Design departments ● Independent ● Consumer goods organizations producers of packaging and/or packaging producers consumer goods producers and and suppliers producers converters ● Contract ● Independent ● Converting packaging designers plants companies? of raw material ● Design companies producers

Collaboration and information exchange Figure 3.7. Value chain flow diagram.

11 3.4.2 Market players ● Graham Packaging Poland Sp. z o.o. ● GTX Hanex Okastuc Sp. z o.o. Research & development institutions ● Eurofilms Polska Grupa Ergis SA ● Amcor Flexibles Polska Sp. z o.o. ● COBRO Polish Packaging Research and Develop- ● Sealed Air Polska Sp. z o.o. ment Center (Centralny Osrodek Badawczo-Rozwojowy Opakowan ): research and development, testing, certifi- Metal packaging producers cation www.cobro.org.pl ● Asko Vogel & Noot Sp. z o.o. Directions of research conducted by COBRO: ● Ball Packaging Europe Sp. z o.o. – Food safety (research concerning migration method- ● Can-Pack SA ology, conducting expertises ordered by industry ● DGS Sp. z o.o. concerning migration i.e. checking compatibility ● Crown Packaging Polska Sp. z o.o. with directives) – Development of modern packaging materials and Glass packaging producers packaging systems (packaging with active anti – mi- ● Owens-Illinois Poland (~40% market share) crobial functions and other active packaging) ● Warta Glass Group (~20% market share) – Limiting unfavorable influence of packaging on the ● Rexam Szklo Gostyn SA (~20% market share, environment (designing packaging systems based on purchased by Ardagh Glass) ecological criteria, Life Cycle Analysis – evaluating ● Huta Szkla Ujscie (Ardagh Glass) LCA in the case of different packaging solutions used ● Huta Szkla Stolzle Czestochowa for concrete product) ● Huta Szkla Orzesze (Can Pack) – Protection of packed goods in transportation (among ● Huta Szkla Czechy others: research and certification of dangerous mate- ● Huta Szkla Slawa rials packaging). ● Huta Szkla Feniks

● COBICO Sp. z o.o.: research concerning metal and plastics packaging and packaging materiále Design companies www.cobico.pl There are more than 10 agencies specializing in design Research conducted by COBICO: packaging e.g. – Basic chemical reserach of food packaging ordered ● Dragon Rouge (the biggest) by industry ● Studio DN Design Group – Research on migration in food packaging ordered by ● Brand Identity Polska industry. ● Studio Projektowe Ikar ● Studio Opakowan Art-Pack ● Taste Agencja Reklamowa Packaging and packaging raw material ● Soul and Mind Group producers ● Criterium Polska Paper and board packaging producers ● Lothar Bohm ● Carre Noir ● Stora Enso Poland (5 plants) ● De Facto Communication & Design ● Smurfit Kappa Poland (5 plants) ● Mondi Packaging Paper Swiecie S.A. ● DS Smith Polska S.A. (2 plants) Packaging producers (converters) ● Eurobox Polska Sp. z o.o. Printing houses and laminators ● Werner Kenkel ● Huhtamaki Poland Sp. z o.o. Types of packaging / Companies ● Esselte Polska ● Flexible plastics (foil, laminates) ● Polpak Karton Sp. z o.o. – Nordenia Polska Poznan Sp. z o.o. ● Ultra Pack S.A. – Teich Poland Sp. z o.o. ● Amcor Flexibles Polska Sp. z o.o. – Leda Sp. z o.o. – DK Lamin Sp.j. Plastics packaging producers – Coffee Service J.v. ● Alpla Sp. z o.o. ● Flexible materials (foil, tinfoil, paper laminates) ● CeDo Sp. z o.o. – Wodamex Drukarnia ● Ergis Group Sp. z o.o. – Drukarnia Opakowan OPUS S.A. ● Huhtamaki Polska Sp. z o.o. – Kety S.A. ● Marflex – M.J. Maillis Poland Sp. z o.o. – Schur Flexible Poland Sp. z o.o. ● DGS SA – Reuther Polska Sp. z o.o.

12 ● Paper and cardboard ● Zakład Przteworstwa – Drukrnia Offsetowa Borys S.C. Miesnego JBB Import- – Mondi Packaging Solec Sp. z o.o. Export Meat – Elano- PACK E. Arktyk i S-ka ● Phillip Morris Polska S.A. Tobacco ● Bat Polska S.A. Tobacco ● Glass (endornment) ● Imperial Tobacco Polska S.A. Tobacco – Dekor Glass Sp.j. – Rex Glass Sp.j. Non-food producers – Euroverlux Sp. z o.o. Pharmaceutical companies – Heinz Glas ● GSK Pharma SX ● Metal (endornment) ● Polpharma S.A. – DGS S.A. ● Servier – Fob Decor Sp. z o.o. ● Aventis ● Plastics (different shapes) ● Novartis Pharma ● – Polipack Sp.j. Roche ● Lek Extrusion coating companies ● KRKA ● Sanofi- Synthelabo ● Amcor Flexibles ● Astrazeneca ● International Paper Kwidzyn ● Adamed ● Wipak ● Novo Nordisk ● Pliva Krakow Producers and suppliers of consumer goods ● Polski Holding Farmaceutyczny (Brand owners) ● Polska Grupa Farmaceutyczna S.A. ● US Pharmacia Food producers ● Jelfa S.A. Name Products Cosmetics producers ● Kompania Piwowarska S.A Poznan Beer Face-care cosmetics ● Grupa Żywiec S.A. ● L’Oreal GK , Żywiec Beer ● Eris ● Krajowa Spolka Cukrowa ● Nivea S.A. Torun Sugar ● Soraya ● Animex Sp. z o.o. ● Ziaja Warszawa Meat ● Oceanic ● Nestle Polska Chocolate, candies ● Spoldzielnia Mleczarska Make-up cosmetics Mlekovita GK Diary products ● L’Oreal ● Masterfoods Polska Sweets, convenience ● Astor food, pet food ● Max Factor ● Ferrero Polska Sweets ● Ingot ● Danone Sp. z o.o. Diary products ● Joko ● Sokolow S.A. Meat ● Bell ● Zakłady Tluszczowe ● Pierre Rene Kruszwica S.A. Vegetable fats ● Miss Sporty ● Spoldzielnia Mleczarska ● Vipera Mlekpol Diary products ● Constance Carol ● Agros Nova Sp. z o.o. Juices and soft drinks ● Grupa Maspex Juices and soft drinks Household chemical products producers ● Frito Lay Poland Snacks, chips and Friče ● Procter and Gamble Operations Polska ● Hortex Holding S.A. GK Juices, jams and ● Reckitt Benckiser Poland frozen food ● Henkel Polska Sp. z o.o. ● Hochland Polska ● Kimberly-Clark S.A. Sp. z o.o. Diary products ● Colgate- Palmolive Poland Sp. z o.o. ● Sobieski Sp. z o.o. GK Spiritus ● Unilever ● Grupa Duda GK Sosnowiec Meat ● Inco-Veritas S.A. ● Coca Cola HBC Polska Beverages ● Pollena-Astra

13 Clothing, textiles, shoes and leather products Household electric appliances and lighting systems producers producers Name Products ● Amica S.A. ● ● Vistula & Wolczanka S.A. Clothing Ardo S.A. ● ● Gino Rossi Footwear and Electrolux Poland Sp. z o.o. leather clothing ● Indesit Copmany Polska Sp. z o.o. ● ● CCC Footwear Lena Lighting S.A. ● ● Polska LPP S.A. Clothing Phillips Polska ● Phillips Lighting ● Monnari Clothing ● BSH Sprzet Gospodarstwa Domowego ● Prochnik Clothing ● Siemens Polska ● Artman S.A. Clothing ● Samsung Electronics ● Redan Clothing ● Sanwil Footwear Accessories (crockery and cutlery, applied art ● Masters Jeans clothing products, etc.) producers ● Mewa Workwear ● Protector LZPS S.A. Military, protective and Company Products tourist footwear and ● Gerlach S.A. Cutlery tanned leather ● Zakład Produkcyjno- ● Wojas Footwear Handlowty “Plater” Cutlery ● Lukbut Sp. Z o.o. Footwear ● Chodziez S.A. Cockery ● Ćmielów Sp. z o.o. Cockery Textile mills ● Fabryka Porcelany Name Production Wałbrzych S.A. Cockery ● Porcelana Slaska Cockery ● Bielbaw S.A. Cotton goods ● Fabryka Porcelany ● Orzel Zaklady Lniarskie S.A. Linen and Cotton fabrics Krzysztof S.A. Cockery ● Sanwil S.A. Synthetic leather and ● Lubiana S.A. Cockery coated materials ● Wistil S.A. Silk goods Private label owners ● ZPB Frotex S.A. Towels, Bath Robes Retailers Furniture producers Company Chains ● Black Red White ● Jeronimo Martins Biedronka ● Swedwood Poland ● Tesco Tesco, Savia ● ● Grupa Nowy Styl Auchan Auchan, Schevier, Elea ● ● Grupa Forte Carrefour Carrefour, Champion ● ● Adriana Metro Group Real ● ● Kolekcja Mebli Klose E.Leclerc E.Leclerc ● ● Fameg ITM Intermarche ● Tangelmann Plus Discount ● Swarzedz Meble S.A. ● MM International Sp. z o.o. Wholesalers ● WFM Oborniki ● Makro Cash & Carry ● Zamojskie Fabryki Mebli S.A.

Consumer electronics (including PCs etc.) producers ● Alcatel Lucent Polska S.A. (telecommunication) ● DELL Sp. z o.o. (computers) ● Daewoo EM Sp. z o.o. ● Ericsson Sp. z o.o. (telecommunication) ● IBM Polska Sp. z o.o. (computers) ● Nokia Poland Sp. z o.o. (telecommunication) ● NTT System S.A. (computers) ● NTT System Sp. z o.o. (computers) ● OPTIMUS S.A.(computers)

14 3.5 Local Regulations Affecting 3.5.3 Local regulation on the recycling the Use of Packages Recycling and environment field 3.5.1 Definition of the main legislation ● Law on waste, came into force on April 27, 2001 (Jour- nal of Laws No 62 Item 628) Poland as a member of European Union has a fully harmo- ● Law on international waste trade, came into force on nized legislation with the EU; the legislation was prepared July 30, 2004 (Journal of Laws No 191, Item 1956) and accepted before Poland entered European Union in ● Law on environment protection, came into force on May 2004. April 27, 2001 (Journal of Laws No 62, Item 627, with further changes). There are two most important laws that control and affect the use of packages in Poland Regulations concerning Recycling and ● Law on packaging and packaging waste, came into force Environment Field on May 11, 2001 (Journal of Laws No 63, Item 638, with ● Regulation issued by the Minister of Environment on further changes) yearly levels of recovery and recycling packaging waste, ● Law on entrepreneurs responsibilities on various kinds May 24, 2005 (Journal of Laws No 103, Item 872) of waste and on deposit and product sum, came into ● Regulation issued by the Minister of Environment on the force on May 11, 2001 (Journal of Laws No 63 Item 639, waste catalogue, September 27, 2001 (Journal of Laws with further changes). No 112, Item 1206).

There are also regulations related to the topics in the field of packaging 3.6 Product Safety and Packages ● Regulation on product sum, on September 11, 2001 ● Regulation issued by the Minister of Health on deposit 3.6.1 General regulations for the dangerous materials packaging, August 24, 2004 (Journal of Laws No 202, Item 2078) For food packaging ● Regulation issued by the Minister of Environment on ● marking of packaging patterns, April 23, 2004 (Journal Law on food and nutrition safety, August 25, 2006 of Laws No 94, Item 927) (Journal of Laws No 171, Item 1225) ● ● Regulation issued by the Minister of Environment on de- Regulation issued by the Minister of Agricultural and posit sum, September 28, 2006 (Journal of Laws No 225, Rural Development on labeling foodstuffs and permissi- Item 1645). ble substances, December 16, 2002 (Journal of Laws No 220, Item 1856).

Standards on packaging in Poland For dangerous goods packaging Poland is a member of European Committee for Standard- ● Law on chemical substances and preparations, January ization CEN. Standards prepared by CEN are currently in- 11, 2001 (Journal of Laws No 11, Item 84). troduced in Poland. Some standards are not introduced using the translation method but using so called “cover For pharmaceuticals packaging method” i.e. the title of the standard is translated but the ● Pharmaceutical Law, September 6, 2001 (Journal of standard text is in English. These standards are already Pol- Laws, No 53, Item 533) ish standards. ● Braille format on packaging: EC Directive came into force on May 1st, 2007 (Amendments to the Pharmaceu- There is no obligation concerning material identification of tical Law); according to that all consumer packaging of packaging in EU. There is only a Decision (not a Regula- new pharmaceuticals should be market in Braille format. tion) suggesting this kind of identification. In Poland there is Regulation (Journal of Laws No 94/2004, Item 927) suggesting the compliance of material identification as well as 3.6.2 Package as a tool against recycling and multi-use identification with European one. product frauds This regulation provides templates for materials identification. The most typical cases of the food products frauds as covered by media and industry resources 3.5.2 Development of regulations ● Vegeta against Prymat: Vegeta suggested imitation of Polish Law concerning hygienic-sanitary requirements for the packaging whereas Prymat just entered the product materials and products designated for the contact with food category (for this new category blue background is typi- is completely harmonized with EU regulations. cal)

15 ● Kucharek (Prymat) brand against Kuchmix brand been authorized by the Ministry of Culture to act as a col- (Kamis); Kamis quited the idea lective rights management organization. ZPAV was ● Jan Niezbedny brand (Sarantis) against Gosia Gosposia founded in 1991, ZPAV associates nearly one hundred in- brand (Politan), Jan Niezbędny brand was copied even dustry representatives (physical persons) and approxi- in the Ukraine mately 40 record companies (major international compa- ● Nestle instant coffee against Mokate instant coffee: nies as well small, independent businesses), and in value Mokate products were similar to Nescafe patterns; terms accounts for over 80% of the Polish music market. Mokate lost court case ZPAV is the Polish National Group of IFPI (The Interna- ● Kraft Foods Polska against Terravita Holding Establish- tional Federation of the Phonographic Industry is an orga- ment concerning packaging of milk chocolate with ha- nization which associates over 1,400 companies in more zelnuts than 75 countries world-wide). ZPAV’s activities focus ● Metylan glue for wallpapers (Henkel) against Merylan mainly on: collective management of the rights of glue for paints and varnishes (Technicolor G. Houlis); phonogram producers and anti- piracy activities. Henkel lost the court case in Poland ● False production/copying of CD/DVDs (games, movies, Business Software Alliance (BSA) Polska music discs). (www.bsa.org.pl) Business Software Alliance works to advance policy solu- Most common tools of protection against tions that promote innovation, job creation, and economic product fraud and their development growth. To combat software theft, the BSA supports strong legislation enforced by deterrent penalties; it also opposes ● Registration of trademark efforts to impose government-mandated technology stan- ● Print type and high quality of design (difficult to copy) dards in the name of copyright protection ● The use of special colors on packaging that are not in master (the color content is the secret. Polish Musical Performing Artists’ Society (www.sawp.pl) Public organizations against products fraud SAWP is an association established in 1994 by a represen- and their vision of package development tation of Polish leading performing artists - both featured ProMarka Association (The Polish Association of and non featured - singers, soloists and session musicians Branded Products Manufacturers) in order to realize and protect vested in them related rights. Association was established as an initiative takes by a rep- Performers related rights came into force for the first time resentation of the FMCG companies. At present nearly 50 along with 1994 Polish Copyright Act. Performing musi- companies constitute the Association. The basic goal of cians were vested to receive remuneration for using of their ProMarka is to act with respect to the establishment, pro- recorded (fixed) performances (CD’s, video, broadcasting, motion and protection of the trade market as a mean to sin- public performance from recording in discos, pubs, restau- gle out the product, as well as to protect the branded prod- rants, also making available and other). uct and its consumer. ProMarka represents branded goods manufacturers in the contacts with the administration, so- In 1995 SAWP was granted by the Decision of Minister of cial organizations and other institutions in fighting coun- Culture as a collective management society with the right terfeit products. of collect and distribute mentioned above remuneration. Minister of Culture also vested SAWP to collect amounts ProMarka has been closely co-operating with a number of from fair use on home taping together with ZAiKS and international organizations including: The World Federa- ZPAV (authors and producers collective management so- tion of Advertisers (WFA) and the European Brands Asso- cieties in Poland) and distribute such levy from audio part ciation (AIM). Within AIM Promarka undertakes a lot of to the right holders. activities with respect to protection and promotion of the intellectual property and the brand value. Union of Polish Performing Artists` Associations ”STOART” (www.stoart.org.pl) National anti-pirate associations, organizations Association of TV Programs Distributors SYGNAL or unions and their opinion on the current (www.sygnal.org.pl) situation and future perspectives of the struggle with pirates Association PRO – Polish Software Market (www.pro.org.pl) The Polish Society of the Phonographic Industry Foundation of Audiovisual Production Protection FOTA ZPAV (www.zpav.pl) (www.fota.net.pl) The Polish Society of the Phonographic Industry is an asso- Association of Authors ZAIKS (www.zaiks.org.pl) ciation of producers of phonograms and videograms. It has BSA + FOTA + ZPAW create jointly Anti-Pirate Coalition

16 4 Consumer Packaging Market in Czech Republic

Czech Republic – General data

Population 10.3 mill. GDP 113.4 bn € GDP per capita 11,047 € GDP growth 6.1 % Inflation 2.5 % Unemployment 7.1 % (preliminary data of 2006)

The highway network (55,457 km in 2005), already the densest in Central and Eastern Europe, has been planned to double by the end of 2007.

Several rail modernization projects are currently underway to link Czechia with the pan-European network of high-speed trains.

Agriculture and foresty 3%

Industry 30%

The Czech economy’s development in 2005 (final data of 2006 will not be available before July 2007) can be characterized by a high rate of GDP growth. After the economy’s Construction relatively weak performance in 2002, three years of grad- Services 6% 61% ual GDP growth followed. This is why the Czech Republic was ranked among the EU-25 states with the fastest grow- GDP Structure ing economies.

17 Mio EUR 400 350 300 250 200 150 100 50 0 2001 2002 2003 2004 2005

Export Import

Figure 4.1. Finland’s Trade with Czechia.

● Czechia is a member of the EU since 2004 and aims to ● Highly educated work force. Good access to technically probably enter into the EURO zone in 2010–2012 educated university graduates ● Czechia is closely tied to other EU economies, ● Investment incentives have been regularly harmonized especially Germany’s. with EU legislation. – Main export partners: Germany 33.2%, Slovakia 8.7%, Austria 5.5%, Poland 5.5%, France 5.4% – Main import partners: Germany 30.0%, Russia 5.6%, 10 000 9 000 Slovakia 5.4%, China 5.2%, Poland 4.9% 8 000 7 000 ● The EU countries represent some 70% of the total 6 000 market for Czech-based manufacturers. 5 000 4 000 ● Foreign-backed manufacturers are estimated to: 3 000 – Represent 48 % of total production 2 000 – Produce 72 % of all Czech manufactured exports 1 000 0 – Directly employ 338 000 people in the Czech 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004* Republic H1 2005*

● Finland’s export to Czechia was 220.7 million EUR and import value was 368.0 million EUR. Figure 4.2. Inflow of foreign direct investment to the Czech Republic (Mil. EUR). *Preliminary data

Investing in the Czech Republic 4.1 Description of the Consumer ● Czechia has been the leader in the Central European re- Packaging Market in CZ gion in FDI inflow per capita since 1999. Over 99,000 Czech firms across all sectors are now supported by for- Most important aspects of consumer goods packaging: eign capital. ● Proper protection ● The change in the structure of FDI shows the new trend ● Easy and safe logistics in the Czech Republic – demanding projects in the field ● of research, development and shared services are rap- Technical parameters (i.e. weight, health harmlessness) idly increasing. ● Selling parameters (promotion, information).

Packaging in terms of their functionality: Some advantages ● Consumer packages (primary) ● Grouping/Display packages (secondary) ● Strategic position in Central Europe, easy transport ● Transport packages (tertiary). access ● Developed transport and telecommunications infra- In the Czech Republic, there are more than 1000 packaging structure companies, about 70 companies are the leaders in the sector.

18 4.1.1 Basic segmentation Consumption of packaging materials in the Czech Republic Segmentation of consumer goods Share in % Share in % For its studies and researches on manufacturing industry Packaging material, Data 2005 in terms of value in terms of weight including manufacturing of consumer goods, Finpro CZ utilizes usually branch-structured materials. They follow Paper 33 % 37 % classification of economic activities according to OKEČ – Czech Branch Classification of Economic Activities that Plastics 26 % 21 % corresponds to international classification NACE. For the Glass 29 % 28 % purpose of this study, the OKEČ-based segmentation is too detailed and fragmented. That is why Finpro CZ divided Metals 7 % 10 % consumer goods in this chapter into groups according to their typical use of packaging materials. Other 5 % 4 % ● Food & Tobacco (meat processing, milk processing, Total 100 % 100 % vegetable & fruit processing, beverages, oil and margarines, other food as bakery products, milling products, Paper: 143,3 kg/capita/year chocolate and confectioners, pet food and tobacco prod- Corrugated board: 35 kg/capita/year ucts.) Folding boxboard with print: 25 kg/capita/year ● Consumer Chemicals (pharmaceutical products, cosmetics, household-related chemical products) ● Consumer Electronics & Electric Appliances (audio-video sets, PC and PC-related accessories, white technology, hand appliances, lighting systems, electrical 4.1.2 Utilization of packaging materials hobby products and tools) in relation to the consumer ● Toys and Accessories (children and pet toys, crockery and cutlery, applied art products) product groups ● Other (furniture, clothing, textile, shoes and leather Local consumer goods manufacturers are relatively well products, hobby products). equipped with packaging technology – at least the most significant ones, especially in the food sector. They use Segmentation of packaging materials and forming, filling and closing machines and/or their combi- packages nations, wrapping machines, group-wrapping machines and palletizers. Of course, the level of packaging technol- Segmentation of packaging materials: ogy differs in each company. The most significant produc- ● Paper ers of packaging technology in the Czech Republic are as ● Plastics follows: ● Glass ● Ekobal (wrapping machines) ● Metal ● VELTEKO (vertical form, fill & seal machines) ● Other (Wood and Textile). ● Sellier & Bellot (vertical hose packaging, filling, clos- Segmentation of packages: ing, packaging and group packaging machines). Paper and board Local producers of consumer goods utilize packaging ma- ● Paper-based chines and technology both from local and from foreign ● Board-based suppliers. Italians lead in supplies of machinery, local suppliers offer cheaper solutions. Finns are perceived in the Plastics market as an expensive supplier with no service. ● Flexible ● Rigid The Czech market is highly saturated in terms of both Glass packaging machinery and packaging materials. ● Glass bottles For secondary and tertiary packaging, folded cartons and ● Glass containers plastic transport boxes are used. Wooden pallets (EURO Metal pallets) and shrink foil present typical tertiary packaging in the Czech Republic. ● Steel-based ● Aluminum-based Materials for primary packaging differ according to con- Combined material-based crete consumer goods, which shows the description below.

19 Food & tobacco Similar packaging materials for all products – paper/cardboard, folded carton, flexible and rigid plastics, wood. Of- Milk processing ten, corrugated cardboard boxes of different sizes are used. ● Paper/cardboard, flexible and rigid plastics, in small portions also glass, metal/aluminum (for covers) Toys and accessories (children and pet toys, Meat processing crockery and cutlery, applied art products) ● Flexible and rigid plastics dominate, beginning of intelligent packaging (thermo-labels) Paper/cardboard, flexible and rigid plastics, for luxury products and children toys also wooden boxes Fruit and vegetable processing ● Metal packages (cans), glass traditionally, plastics Other (furniture, clothing, textile, shoes and leather Beverages products, hobby products) ● Glass dominates for beer and alcoholic drinks, plastics Marketing/selling function of packaging for this group is and cardboard (multi-layer laminates) accepted for soft limited. Packaging and packaging materials do not play drinks and packaged water, metal packaging (cans) for any important role in decision-making on product purchase beer, energy drinks and some branded soft drinks (as in this group. Paper/cardboard, flexible and rigid plastics Coca Cola, Sprite, etc.) are mostly used, for luxury products (textile, leather) tex- Oil and margarines tile is sometimes used. ● Rigid plastics, PET bottles, aluminum foils Bakery and milling products, confectionery 4.1.3 Packaging design ● Paper/cardboard, flexible and rigid plastics, aluminum In the Czech Republic, packaging producers take usually foils, exceptionally textile (bags for flour), metal boxes care of package design. They have special design depart- for luxury products ment with specialists who know packaging materials and Pet food their features and possibilities, requirements for ready ● Metal packaging, plastics, cardboard boxes packages with respect to their logistic and marketing functions. They cooperate closely with producers of the con- Tobacco sumer goods that should be packed. ● Paper/cardboard, aluminum foils, plastic foils, wooden and metal boxes for specific products. Specialized package design companies have only complementary role here. Packaging design combines package Consumer chemicals structure, package function, and package appearance. Czech packaging design companies focus mainly on pack- Pharmaceutical products age structure, specifically printing design. Anyway, print- ● Paper/cardboard, plastics, metal/aluminum (aerosol ing design can be worked out separately (not as a part of the packaging), glass whole design package). The main bottleneck of Czech packaging design companies is lack of knowledge on pack- Cosmetics age specifics. ● Paper/cardboard, plastics, metal/aluminum, glass usually for luxury products For the good order sake, Finpro names the most significant Household-related chemical products designers in the field of packaging: ● Studio Činčera Praha ● Plastics prevail, metal and glass packaging for some ● Konstukční a obalový design Brno products, aerosol packaging. ● Konkard Praha ● Racek – Inspi – Design Krahulčí. Consumer electronics & electric appliances (audio-video sets, PC and PC-related accessories, white Besides the named companies, there are also well-recog- technology, hand appliances, lighting systems, electrical nized independent designers – Mr. Boris Růžička and Mr. hobby products and tools) Kočandrle.

20 4.1.4 Marketing and distribution channels

ABROAD

FOREIGN MANUFACTURERS OF PACKAGING AND PACKAGING RAW MATERIAL

Secondary LOCAL MANUFACTURERS raw material IMPORTERS / REPRESENTATIVES OF PACKAGING AND processors OF FOREIGN MANUFACTURERS PACKAGING RAW MATERIAL

LOCAL PRODUCERS OF CONSUMER GOODS

RETAILERS

END USERS / BUYERS OF CONSUMER GOODS

CZECH REPUBLIC RECYCLING Flow of products (new packaging) Flow of waste (used packaging)

Figure 4.3. Distribution channels in packaging business.

IMPORTERS / REPRESENTATIVES OF FOREIGN MANUFACTURERS LOCAL PRODUCERS OF CONSUMER GOODS OF PACKAGING AND PACKAGING RAW MATERIAL

LOCAL MANUFACTURERS OF PACKAGING AND RETAILERS PACKAGING RAW MATERIAL

END USERS / BUYERS OF CONSUMER GOODS

Typical marketing channel Complementary marketing channel

Figure 4.4. Marketing channels in packaging business.

21 4.1.5 Trade fairs 4.1.6 Requirements of end users

Retailers

● Easy manipulation, easy logistics and easy expedition – lowest possible weight of packages ● Low costs for manipulation and logistics EmbaxPrint Brno – International Fair on Packaging, Pa- ● Attractiveness for consumers – promotion. per and Printing Industry – materials, machines and technologies; Výstaviště Brno in May, every two years Consumers http://www.bvv.cz/embaxprint ● Practicality = easy to take it home, easy and comfortable storage home, easy liquidation after consumption) ● Good visibility in the shop (to be easily found) ● Good and proper labeling (to be readable, with all information) ● Environmental requirements (recyclable packaging) – MSV Brno – International Engineering Fair (leading tech- only part of consumers focus on this requirement but the nology-related fair in Czechia); number has been slowly growing, specifically among Výstaviště Brno in September/October, every year young people. They take into account the recyclability http://www.bvv.cz/msv-gb of the packaging – preference of paper packaging to plastic one and the possible way of liquidation – whether it is possible to throw it into selected waste or whether it is reversible packaging.

Salima Brno – International Food Fair (including food-re- 4.1.7 Packaging recycling in the Czech lated packaging technology); Republic Výstaviště Brno in March, every two years http://www.bvv.cz/salima Based on the valid legal framework, producers, importers, fillers, and distributors of packaging and packaged products shall ensure collection and recovery of packaging

Figure 4.5. CZ: Packaging Recycling Report.

22 waste. The municipalities shall separate and recover waste. through municipal schemes. EKO-KOM, a.s. co-finance Part of sorted components of municipal waste is also con- costs of municipal separate collection of packaging waste sumer packaging, which should be recovered. from households and cooperate with waste management operators to ensure collection of packaging from industry Consumer packaging and individual waste have been se- and retail lected in the Czech Republic for several years and the quantity of the selected waste has been growing. The peo- For more information see www.ekokom.cz. ple (specifically the younger and educated ones) are aware of recycling necessity and of environmental aspects.

The following table shows the packaging recycling in 2003 4.2. Competition on the Consumer and 2004. According to the latest news, Czechs are very Packaging Market thorough in selection of plastics, specifically PET bottles (every second PET bottle returns for recycling in the Czech It is very hard and often practically impossible to distin- Republic). In 2006, 43 kg of waste per person was selected, guish between foreign and local companies as regards the which is by 7 % more in comparison with 2005. In 2006, leading players in the market. The thing is that the compa- 44 % of plastics were recycled; recycling of waste totally nies of a certain name appearing as local ones often are at made 56 %. least partially owned by foreign capital via another-name companies. Therefore, individual investigation through PRO EUROPE = Packaging Recovery Organisation Eu- Commercial Register in combination with cross-checking rope is an international umbrella organisation for national with the help of commercial databases would be necessary member systems for the recovery and recycling of packag- (if ever sufficient). This sort of investigation is, of course, ing waste in Europe. PRO EUROPE serves as a forum for outside the scope of this study but can be done to further re- the participating national partner organisations, as an in- quest as a follow-up. tensive exchange of experiences and ideas essential for op- timal application of Directive ES 94/62 on packaging and packaging waste. 4.2.1 Leading players and their packaging-related products PRO EUROPE systems use the Green Dot mark as a sym- bol of financing packaging waste recycling. Paper and Board

Company Related products

Mondi Packaging Paper sulphate paper sacks Czech Štìtí

The Green Dot is the trade mark. The Green Dot placed on Smurfit Kappa corrugated boxboard packaging means that an obligatory entity pays a financial Model Obaly corrugated board amount to the packaging recovery organization for take-back, sorting and recovery of packaging in accordance to Directive 94/62/EC. Plastics

The authorized company in the Czech Republic is Company Related products EKO-KOM a.s. working as a licensee of The Green Dot in the Czech Republic since September 2000, which means FLEXIBLE that the Green Dot can be marked on products or packaging Al Invest TAPA barrier foils distributed in Czech Republic only with acceptance of EKO-KOM, a.s. Granitol PE foils

Cutisin edible and non-edible EKOKOM a.s. provides associated compliance of casings take-back and recovery of packaging waste, based on the authorized decision made by Ministry of the Environment. RIGID The take-back and recovery obligations (based on articles of the Packaging Act 477/2001Coll.) apply to any entity Greiner Packaging yoghurt cans that places, or puts into circulation any packages or pack- Alfa Plastik bottle crates and age products, mainly those who produce, import or sell. vegetable containers The entities could join the EKO-KOM system and ensure obligations of take-back and recovery of packaging Plastové pøepravní obaly plastic transport packing

23 Glass Local specificities ● Very wide scale of players both international and local in Company Related products relation to the absolute size of the market in comparison with other new EU member countries O-I Avirunion bottles and similar ● Exceptionally high consumption of packed water per ca- Vetropack Moravia Glass bottles and similar pita (long-term tradition) despite the quality of tap water is good ● Exceptionally high consumption of beer per capita (the Metal highest in the world) - glass prevails, plastic bottles are not accepted by consumers Company Related products ● Specialized package design companies are only complementary (mainly used for printing design) as local pack- Rexam beverage cans age producers/suppliers use to have their own design de- Impress food cans partments and international ones often order the design abroad. Al Invest Al-foils

Moravia Cans aerosol cans 4.3 Local Trends in the Consumer Packaging Market Wood and Other 4.3.1 Anticipated overall trends Company Related products

Logis Prùmyslové obaly transport cases and boxes CZ: forecast packaging 03-09 per material

První obalová cases and boxes 2004- 2003 2004 2005 2009 2009 CAGR (%) 4.2.2 Competitive edge and local paper & board 10 934 11 197 11 477 12 722 13,6 specificities plastic 14 054 14 793 15 579 19 260 30,2 metal 8 495 8 662 8 840 9 638 11,3 Competitive edge examples mil. CZK glass 1 410 1 401 1 392 1 368 -2,4

Company Competitive edge wood 443 450 456 487 8,2 products/procedures total 35 336 36 503 37 744 43 475 19,1 Source: CSÚ, CNB, MFCR, SYBA, Pira International/WPO Al Invest Tapa innovative flexible and combined packaging Figure 4.6. Assumed consumption of packaging mainly for food but also materials by 2010. for consumer chemicals

Pharming innovative folding boxboards Overall qualitative trends ● THIMM + Smurfit Kappa cardboard boxes for beer Deepening integration of international players in the grouped packaging Czech market ● Gradual decrease in the wrapping weight while keeping Granitol innovated foil for water the utility parameters of the packaging used grouped packaging ● Continuous increase in emphasizing related environmental aspects OTK Group + Rexam the only two companies ● High portion of package consumption by food & to- certified for printing bacco industry (currently some 70%) to further continue ● Maso Planá special thermo-labels that More comfortable way to open and a possibility to (meat processor) change color and the bar re-close/re-cap the packaging code gets illegible for the ● Smaller portions/amounts of specific goods per a pack- cash reader after the age required by consumers. expiry deadline

24 Braille format on packaging

● as 2004/27/EC Directive requires to express the name and other particulars on the packaging of medicinal products, a representative of the Czech Packaging Asso- ciation is a member of related CEN Braille Document Task Force; the Directive is fulfilled thanks to the initiative of the pharmaceutical industry; also wine producers apply Braill format on the wine bottle labels.

4.3.3 Challenges and threats

● The market is highly saturated in terms of both packaging materials and packaging machinery (and also pack- Figure 4.7. Packaging Recycling Target by 2012. aging applications as such) ● According to one of the experts interviewed: “Italians lead in supplies of machinery, local suppliers offer 4.3.2 Weak signals cheaper solutions, Finns are expensive and give no service”. Intelligent packaging

● e.g. preserving agents to be placed in the package cap in- stead of in the food packed (amount of the agent needed 4.4 Players in the Consumer is smaller this way and so is the amount of potentially harmful chemicals penetrating in human body). Packaging Value Chain

Biodegradable packaging 4.4.1 Value chain of packaging industry

● yet the first applications have appeared, still necessary The blue boxes represent basic phases of value-adding in financial means have to be invested to develop this inno- packaging process while the orange boxes list typical play- vative, environmentally-friendly packaging. ers related to the individual phases. (Fig. 4.8)

Packaging Packaging Consumer Packaging Packaging Raw Production Goods Design R&D Material (Converting) Packaging Production

● R&D ● Raw material ● Design departments ● Independent ● Consumer goods organizations producers of packaging and/or packaging producers consumer goods producers and and suppliers producers converters ● Co-packaging ● Independent ● Converting plants and contract designers of raw material packaging producers companies ● Design companies

Collaboration and information exchange Figure 4.8. Value chain flow diagram.

25 Requirements of the different phases of Consumer Goods Packaging: low price, attractive pack- the value chain ages that perfectly fulfill their functions (easy and cheap lo- Packaging R&D: interest in environmental-friendly mate- gistics, promotion and selling, health harmlessness, environ- rials, interest in materials with easy handling and treat- mental-friendly materials, support in brand creating, etc.). ment, no other special interests identified. Generally, there is a requirement for permanent decreasing of package weight while the other functions/requirements are considered to be guaranteed. Comfortability for the end Packaging Raw Material Production: lowest possible production costs (energy, material, labour), available raw users – for example easy open, possibility to open and re-cap material, utilization of the existing capacity of machinery many times, pill-off and similar solutions. and equipment (lowest possible investments).

Packaging Design: clear specification from consumer 4.4.2 Market players goods producers, wide range of available packaging materials, good features of packaging materials and their easy Research & development institutions applicability, packaging materials with good visualisation There is no specialized R&D organization related to pack- features. aging in the Czech Republic. Some limited functions in this field are fulfilled by individual packaging raw-material re- Packaging Production (Converting): lowest possible lated R&D bodies. The R&D itself is usually made by pack- production costs (energy, raw material, labour), utilization aging companies who cooperate with the above mentioned of the existing capacity of machinery and equipment (low- R&D bodies sometimes. This sort of R&D is considered to est possible investments), support in brand creating. be strictly confidential and none of the packaging companies is willing to disclose the topics they develop.

Packaging and packaging raw material producers Paper and board packaging

Paper and board

Smurfit Kappa Corrugated boxboard

Duropack Bupak Paperboard, corrugated board

Papírny Bìlá Board, folding boxboard

Huhtamäki Moulded fibre

Mondi Packaging Paper Czech Štìtí Sulphate paper sacks

Brnìnské papírny Paper, board

KRPA Paper

THIMM Corrugated board

Olšanské papírny Wrapping paper

Grafobal Solid and corrugated board

Westvaco Consumer packaging, boxes for cigarettes

Rondo Obaly Folding boxes

Model Obaly Corrugated board, folding boxboard, labels

Prowell Multi-layer corrugated board

Probas Corrugated cardboard

26 Plastics packaging

Flexible

Granitol PE foils

Al Invest - TAPA Barrier foils

Fatra PE and PVC foils

Cutisin Casings (edible, non-edible, plastic)

Petružálek Foils

První obalová Foils

Mondi Flexibles Barrier film and foils

Invos Barrier film

Pebal Foils, HDPE and LDPE sacks

Rigid

Greiner Packaging Yoghurt cans

Alfa Plastik Bottle crates and vegetable containers

ObalPro Transport boxes and containers

Triss Transport boxes

Tart Foils, foam PE

Viscofan Plastic plates, sheets, profiles

Plastové pøepravní obaly Plastic transport packaging

První obalová Transport packaging

Vyva Plast Plastic profiles

Metal packaging

Metal

Rexam Beverage cans

Impress Food cans

Moravia Cans Aerosol cans

Glass packaging

Glass

I-I Avirunion Packaging glass

Vetropack Moravia Glass Packaging glass

27 Wood packaging

Wood

Logis Prùmyslové Obaly Wooden transport boxes

První Obalová Wooden boxes

Design companies ● Studio Činčera Praha (specialized in corrugated board) ● Konstrukční a obalový design Brno ● Konkard Praha (specialized in solid board) ● Racek – Inspi design Krahulčí.

Packaging producers (converters)

Printing Houses

Notes

Model Obaly

SCA Jílové u Dìèína

Duropack Bupak

Papírny Bìlá

Invos

Obchodní tiskárny Kolín (OTK) Certificate for label printing

Rexam Certificate for label printing

Laminators

None

Extrusion coating companies

Mondi Coating Paper Štìtí

Al Invest - TAPA

KDN Packaging

28 Producers and suppliers of consumer goods (Brand owners) Food producers

Milk processing

Danone Yoghurts, milky deserts

Olma Olomouc Yoghurts, deserts, milk, cream, margarines

Mlékárna Kunín Yoghurts, deserts, milk, butter

Madeta Èeské Budìjovice Cheese, milk, butter, yoghurts, quark

Povltavská mlékárna Sedlèany Cheese, spreads, butter, other dairy products

Bohušovická mlékárna Milk, cream, deserts, other dairy products

Meat processing

Maso Planá Meat products

Schneider Plzeò Meat products

Váhala Meat products

Fruit and vegetable processing

Hamé Processed fruit and vegetable, baby food

Alibona Processed fruit and vegetable

Seliko Processed fruit and vegetable

Beverages

Karlovarské minerální vody Mineral water

Hanácká kyselka Mineral water

Plzeòský prazdroj Brewery

Budìjovický Budvar Brewery

Pivovar Velké Popovice Brewery

Stock Plzeò Božkov Alcoholic drinks - spitrits

Karlovarská Becherovka Alcoholic drinks - spirits

Other (mills, bakeries, confectioners)

Delta Pekárny Bakery products

Penam Bakery products

Opavia - Lu Bisquits

Nestlé Chocolate, candies

29 Non-food producers

Pharmaceuticals and medicinal products

Zentiva Pharmaceutical products

Ferring – Léèiva Pharmaceutical products

Hartmann Rico Medicinal products, hygienic products

Cosmetics

Johnson & Johnson Baby cosmetics, body cosmetics

DC Dermacol Decorative cosmetics

Salvus Herbs cosmetics

Household-related chemicals

Procter & Gamble Washing powders, household chemicals

Henkel Washing powders, household chemicals

Setuza Soaps, household chemicals

Clothing, textile, shoes and leather products

Odìvní závody Prostìjov Clothing

Blažek Praha Men clothing

Kara Trutnov Leather clothing

Svit Zlín Shoes

Furniture

Koryna Kitchen furniture

Sykora Kitchen furniture

TON Chairs

Consumer electronics

Philips Audio – video appliances

FIC PCs and PC accessories

Household electrical appliances and lighting

Candy White technology

ETA Small electrical appliances

MORA Household electrical appliances

Accessories

Karlovarský porcelán China products

Jakro – HAMIRO Toys

Mountfield Hobby products for house and garden

30 Private label owners

Retail chains

Tesco Stores ÈR Tesco

Schwarz ÈR Lidl, Kaufland

Ahold Czech Republic Hypernova, Albert

REWE ÈR Billa, Penny Market

Spar ÈR Spar

Delhaize Delvita

Globus ÈR Globus

Metro – Makro ÈR Makro

Ikea ÈR Ikea

4.5 Local Regulations Affecting List of standards related to packaging waste the Use of Packages ● ČSN EN 13193 Packaging – Packaging and the environment Terminology 4.5.1 Definition of the main regulation ● ČSN 77 0052-2 Packaging – Packaging waste Part 2: legislation Identification marking of packaging for subsequent packaging waste recovery The Czech Republic as a member of European Union has a ● ČSN 77 0053 Packaging – Packaging waste Instruc- fully harmonized legislation with the EU; the legislation tions and information on way of disposal of used pack- was prepared and accepted before the Czech Republic en- aging tered European Union in May 2004. ● ČSN 77 0054 Packaging – Requirements for returnable consumer packaging There are two most important laws that control and affect ● ČSN EN 13427 Packaging – Requirements for the use use of packages in the Czech Republic: of European Standards in the field of packaging and ● Act No 477/2001 Coll. Act on Packages – it came into packaging waste force on January 1, 2002 and ● ČSN EN 13428 Packaging – Requirements for produc- ● Act No 185/2001 Coll. Act on Waste – it came into tion and composition - Prevention by source reduction force on January 1, 2002. ● ČSN EN 13429 Packaging– Reuse ● ČSN EN 13430 Packaging v Requirements for packag- There are also Governmental Decrees – operating regula- ing recoverable by material recycling tions, Amendments and Directives to the Act No 477/2001 ● ČSN EN 13431 Packaging – Requirements for packag- related to the sensitive topics in the field of packaging: ing recoverable in the form of energy, including specifi- ● Governmental Decree 111/2002 Coll. – on deposit sum cation of minimum inferior calorific value for the selected types of re-use packaging ● ČSN EN 13432 Packaging – Requirements for packag- ● Governmental Decree 115/2002 Coll. – on details for ing recoverable through composting and biodegradation package handling/utilisation Test scheme and evaluation criteria for the final accep- ● Governmental Decree 116/2002 Coll. – on marking of tance of packaging re-use package ● ČSN CR 13695-1 Packaging – Requirements for mea- ● Governmental Decree 641/2004 Coll. – on the evidence suring and verifying the four heavy metals and other and obligatory registration of package. dangerous substances present in packaging and their re- ● Amendment 94/2004 Coll. lease into the environment Part 1: Requirements mea- ● Amendment 66-2006 Coll. suring and verifying the four heavy metals present in ● Directive 94/62/EC on packaging and packaging waste packaging ● Directive 2004/12/EC – Amendment to Directive ● ČSN EN 13695-2 Packaging – Requirements for mea- 94/62/EC suring and verifying the four heavy metals and other ● Commission Decision 97/129/EC – establishing identi- dangerous substances present in packaging and their re- fication system for packaging materials. lease into the environment Part 2: Requirements mea-

31 suring and verifying dangerous substances present in in the field of packaging is Act on public health protection packaging No 258/2000. ● ČSN CR 13504 Packaging – Material recovery Criteria for a minimum content of recycled material. The other important legislation:

The Czech packaging legislation is one of the strictest packaging laws in Europe, however its enforceability is in- For food and tobacco sufficient and reality in its keeping is relatively unsatisfac- tory. ● 110/1997 Act on food and tobacco products ● 409/2005 Decree of Ministry of Health on hygienic requirements for products that are in direct contact with 4.5.2 Development of regulations water and for water treatment (operating directive to 258/2000) The trends in the development in local legislation follow ● 38/2001 Decree of Ministry of Health on hygienic re- the overall trends occuring in the EU and in the world. In quirements for products that are in direct contact with some cases Czech regulators try to be even more innova- food (operating directive to 258/2000) tive than the European ones. ● 1935/2004/ES European Parliament directive on materials and subjects that are intended for direct contact with food 4.5.3 Local regulation on the recycling ● 178/2002/ES European Parliament directive on general Packaging recycling is subject of the valid legislation – Act principles and requirements of food law, and on estab- on Packages and Act on Waste – that is described in the for- lishing European Institution for Food Safety. mer chapters. Packages for dangerous goods

● 356/2003 Act on chemical materials. 4.6 Product Safety and Packages

4.6.1 General regulations Packages for pharmaceuticals

Package safety is a subject of the existing legislation for the ● 79/1997 Act on pharmaceuticals. packaging and waste. Besides, there are other important laws to be respected that are related to the specific group of There is also mandatory marking of the materials used for products that are packed – food, chemical and pharmaceu- packages in accordance with EU – Material identification tical products. Other significant act that has to be followed as per 97/129/EC.

32 4.6.2 Package as a tool against product frauds

In general, packaging proves to be relatively limited tool against the product frauds in Czechia. Referring to the below mentioned cases, product frauds can even misuse the packaging for cheating the consumer.

Most typical cases of the food products frauds ● “Apetito” vs “Smetanito” – in the course of the battle between two cheese producers for the brand, one of them has misused the similarity of the cheese name and even the package (plastic can) to the original one ● False production of hard alcoholic drinks and cigarettes – every year or two there is a case of finding a gang producing such goods (usually Vietnamese are involved) The food safety can be limited due to packages in case that ● False production/copying of CDs/DVD. the packaging does not fulfill its protection role properly. It can be caused by improper packaging or packaging materi- Most common tools of protection against als (bad choice of packaging material, non-suitable fea- product fraud tures of packaging material in relation to the packed products) or improper manipulation with the products (dam- ● Duty stamps are a most common tool on the state level aged packages during transport, logistics in retail or stor- for protection of hard alcoholic drinks and cigarettes age, wrong conditions for storage, etc.). Basically, the ● Patenting and registering the trade marks are the stan- named package safety problems are not subject only for dard tools, however often not used widely enough be- food products (anyway the most important and prevailing) cause of cost of such protection when to be applied in but also for other products – pharmaceuticals, cosmetics, many countries chemical products, etc. ● As a side effect of municipalities‘ efforts to drive out the open-air-market sale into the so-called “stony shops” in In the Czech Republic, there is a state body the Czech buildings, also protection against product fraud im- Trade Inspection (Česká obchodní inspekce) that makes proves. both random testing and checking in the retail units or checking based on customers claims and announcements. Public anti-pirate bodies and organizations Here Finpro would like to stress that cases with jeopardized against products fraud food safety that have been topical in the Czech Republic recently were not result of wrong packaging as such but a re- ● ČOI (Czech Trading/Commercial Inspectorate) is a sult of bad treatment and ignoring of food safety require- state-based body inspecting and penalizing various ments in the retail. types of product-related illegal actions ● SNOS (Society for Protection of a Consumer) – volun- tary association of inhabitants.

33 5 Consumer Packaging Market in Russia

5.1 General Economic Situation Nevertheless, the growth of import to Russia, and import of in Russia consumer goods and food products especially, showed the benefits and attractiveness of modern consumer package to Consumer package in Russia is a fast growing part of the the Russian customers, and initiated the development of whole Russian economy. It’s development can’t be ana- the use of modern package for these segments. This period lyzed without analysis of the general economic develop- can be characterized by use of mainly imported package ment, as the use of package is determined by the production materials by the Russian companies who started the pro- and distribution of other products. duction and distribution of the modern package technologies and materials in Russia. Russia is currently passing the so called “transition period of economy”, described as a transfer from planned socialist Economy and domestic production started to grow at the economy to the modern, market based economy. The first beginning of 2000’s, and the initiating event was the deval- period of the transition period, from the beginning of 90-s uation of Rouble – national currency in 1998, with the 4x to the middle of the second half of 90-s can be character- growth of the US$ price during 1 year. This devaluation ized by the significant decrease of the domestic production immediately made import too expensive for the dominat- and consumption, with the average decrease value about ing majority of the consumers in Russia and gave a good 50%. A lot of people had to change their life style due to the opportunity for the domestic manufacturers to substitute significant decrease of the personal income, and this also the imported products by the products manufactured in put an influence on the consumption, and thus, the demand Russia. for the consumer package.

110

108

106

104

102

100 1999 2000 2001 2002 2003 2004 2005 2006

Figure 5.1. GDP growth in Russia (in %).

112 110 108 106 104 102 100 1999 2000 2001 2002 2003 2004 2005 2006

Figure 5.2. Industrial manufacturing growth (in %).

34 108 107 106 105 104 103 102 101 100 1999 2000 2001 2002 2003 2004 2005 2006

Figure 5.3. Agricultural products growth (in %).

114 112 110 108 106 104 102 100 98 1999 2000 2001 2002 2003 2004 2005 2006

Figure 5.4. Retail turnover growth (in %).

The next years of development showed continuous growth ● Growth of personal income is 21% (1-st quarter of 2006 of GDP, population personal incomes and consumption. and 2007 comparison) ● Real incomes growth (corrected for inflation) is 13% Russian industry was also growing in the years 1999–2006, (1-st quarter of 2006 and 2007 comparison) and it is expected that it will continue to grow in the next ● Average salary growth is 27.7% (1-st quarter of 2006 years. and 2007 comparison).

Nevertheless, it is necessary to mention that even in 2006 Experts opinion says that the growth will continue at least Russian industry did not reach the volumes of the starting till 2010, and maybe even more. point of economical reforms in 1991. Thus, the current volume of agricultural production is 24% less than in 1991, Nevertheless, there is a big difference between develop- food industry is 27% less than in 1991, although some of ment of the regions, and Moscow with the area around the the industries has reached the level of 1991. This clearly city (Moscow Oblast), there can be more than 2 times dif- shows that there still is a good potential for the growth. ference in average salaries. This has generated a big migration of the most active people to the Moscow region The preliminary results of the year 2006 says that the ten- dencies of the previous years continue to specify the degree Difference in economical development of the regions can of the economical development. be roughly explained by the delay of the business develop- ● GDP growth is 6.7% – 6.9% (estimations, exact figure to ment between Moscow and St.-Petersburg and other re- come later in 2007) gions. It was mentioned that the development in St.-Peters- burg is several years later than in Moscow and the develop- ● Inflation – 9%, this is the first year with inflation less than 10% (inflation in 1999 – 36%) ment in the most advanced regions follows those in Mos- cow and St.-Petersburg. ● Stabilization Fund volume: 40.22Bln US$, 31.46Bln €, 4.73Bln £ For example, the development of the modern retail formats ● Private capital inflow is 41Bln US$, 31 of them is for- (retail chains) has started in Moscow and St.-Petersburg, eign capital now it has the significant part in these 2 cities and just started ● Growth of investments into fixed capital – 13.2% to grow to the regions – cities with the population over 1 ● 2006 is a year of IPO, total volume is 10 Bln US$ mln. The delay is about 5–7 years for this business area.

35 Another example is the construction development. Con- ● Development of merchandising increased the role of the struction boom that has started in Moscow in the beginning package as a marketing tool of 2000’s is now coming to the most industrially developed ● Use of convenient package as a benefit for the customer regions with the same delay as the retail development. ● Increase the shelf life (stimulated both by customers and retail) ● Increase of the package durability during transportation (to prevent damage). 5.2 Description of the Consumer Packaging Market In Russia Thus we have 2 major groups of the demands: coming from customers and coming from food chain participants. Short historical review

Brief historical review of the consumer package in Russia Current development of package industry is important for the understanding of it’s development. The recent history of the consumer package is completely de- Modern package industry is a quite a new event in Russia. termined by big economical changes in last 15 years. During 1990’s Russian package market was growing together with the consumer market, and strong macroeco- It is well known that during the Soviet period of the Rus- nomic situation in Russia in 2000’s created a fast growing sian economy development the role of the consumer pack- market with the average annual growth about 10% – 12%. age was lower than now and the main functions of the package was to protect the product and to inform the cus- The market volume has passed the mark of 20Bln US$ in tomer about the product. 2004, and expected growth till 2009 is expected in the range of 10–20% (in money terms). The use of the package in many cases was much smaller than now, for example, such food products as butter, sugar, Average consumption of the package per capita in Russia grains, all fruit and vegetables, meat products, almost all was 80kg in 2003, this is much less that in the Western Eu- cheese, candies, cookies, bread. rope, USA and Japan.

Existing at that moment package was very limited in the According to the data by Prado Consulting, the whole vol- material choice, utilizing mostly paper, carton and it’s dif- ume of the package in Russia was 52mln tons in 2005. This ferent modifications. Use of plastics for packaging was includes about 20mln tons of industrial metal package, very limited, mostly for melted cheese or vegetable oil. where a significant part belongs to the metal containers for This was determined by a small use of plastic due to low the industrial transportation. 75% of the whole weight is in- development of corresponding chemical industry, and dustrial package (mainly metal package), and only 25% is there was even a list of materials allowed for use for con- the consumer package (mostly glass package) sumer goods. These proportions differ very much from those given in The start of the new package materials use by domestic money terms. 80% of 20Bln US$ is the industrial package, manufacturers was initiated by the following reasons: mostly paper and carton, and 20% is the consumer package ● Significant growth of imported products in modern cus- (paper, carton, plastic, glass, aluminium and composite). tom package increased the level of demands of the customers The share of consumer package in the whole package vol- ● Development of the modern retail chains specified the ume is lower that usually in the developed countries, where requirement to the food products to be already packed to the consumer package makes 60% – 70%, and the indus- avoid extra labor in the retail trial package makes 30% - 40%. Nevertheless, the share of

16%

11% Paper/carton Plastic Metal 1% Glass

72% Figure 5.5. Share of different materials (in weight) in consumer package.

36 13% 2% 1% Paper/carton 10% Plastic Metal Glass 57% 17% Wood Composite

Figure 5.6. Share of different materials (in money terms, Prado Consulting).

17%

8% 39% Paper/carton Plastic Metal Glass

36%

Figure 5.7. Share of different materials (in money terms, “Rosupack”).

consumer package in Russia is growing, it was about 10% technologies and equipment, but older technologies and 10 years ago, and the growing rate for consumer package is even second hand equipment can find it’s place on the mar- higher than for the industrial package now. ket. This is determined by the fact that the buying capacity of Russian consumers is lower than in Western Europe and As the definition of “industrial package” and “consumer the market is quite price sensitive. At the same time, Rus- package” is not defined in every detail in Russia, it is obvi- sian market repeats in most of the features the development ous that the package market in Russia is not mature yet, but of the European package market, so the technologies and is developing very rapidly. equipment that are common for the Western Europe are quite new for the Russian market and most likely will be in The shares of different materials in money terms are shown demand during next years. This is also valid for the ICT use at the diagram below (data from Prado Consulting): in the package industry.

Nevertheless, other sources give different shares of the materials used for the package manufacturing (data by Regional distribution of the packaging “Rosupack”): companies in Russia

The share of the paper and carton package is dominating on More than one half of the companies are located in the Cen- the Russian market, and this share is growing. Plastic, glass tral region of Russia, and mainly in Moscow. The second and metal is keeping their smaller shares, and wood is a place is for North-Western part of Russia and St.-Peters- rarely used material.. It is expected that plastic will get burg in it. The third place is shared by 3 regions – West Si- more share of the market as long as the market itself will beria, North Caucasus and Ural. North and East Siberian grow and become more mature. regions have only few companies of packaging industry. The last place belongs to the Central-Chernozem region, Current development of the Russian package industry is but as it is very close to the Central region, there is no need mostly in modernization of the production facilities. to develop packaging industry there due to a good logistics Growing market shows the demands for the new modern for the delivery of the package to this region.

37 Central 2 2 111 North Western 5 3 5 West Siberian 5 Northern Caucasia Ural Volgo-Vyatski 60 Far East 15 Povolzshski East Siberian Northern

Figure 5.8. Regional distribution of the packaging companies in Russia.

Import and export period of 2002–2005. This is determined by the shift of import to more expensive package. Now the most oftenly im- Speaking about import to Russia, it is necessary to mention ported is the package that is difficult to manufacture in that the demand is satisfied mostly by domestic manufac- Russia either technologically or economically. turing of the package. The share of imported package is 3.2% (in money terms) and 1.1% in weight. Nevertheless, import satisfies the demand of the most expensive segment of package, but the situation may change It is hardly possible that the share of import will grow dur- in the next years. ing the next years. Poland was the leading country in exporting to Russia till Nevertheless, according to the data from State Customs the end of 2004. the volume was growing and reached 102 Committee, import to Russia is bigger than export. mln US$ by the end of 2004. Germany and Ukraine were also active players, with the volumes of 99 mln US$ and 77 Export mln USD correspondingly, but Ukraine is the corridor for the import from other European countries. Domestic manufacturers are well represented on the Rus- sian market, but their export to other countries is not very The situation has changed in 2005, when Germany became big. Most deliveries are to Kazakhstan (30–40 mln US$ in a leader in money terms, although in weight it has remained a year), and Ukraine (20–25 mln US$ in a year). there is at the lower level. Ukraine was keeping it’s position. Be- also export to Azerbaijan, Uzbekistan and Germany (in sides these countries, the following countries has formed sum of 3–5 mln US$). the Top 10^ China, Austria, France, UK, Italy, Finland and Czech Republic. Year 2003 showed a significant growth of the export from Russia (in weight). This was related with the higher growing rate of the Russian package industry than in the import- ing countries. Then, in 2004, export decreased, but in 2005 5.3 Basic Segmentation of the returned to the level of 2003. As for money terms, it was Consumer Package in Russia growing until 2004 and has stabilized in 2004–2005. It is possible to make segmentation of the consumer pack- Leaders of the export are in the paper and carton package, age in Russia using 2 different criteria: the export volume of these materials package was 39.2 mln ● By material US$ in 2004, most of export of these materials package ● By industry. was to Ukraine with the volume of 21083 tons. Segmentation by material can be made in the following way: Import ● Paper and Carton Import volumes in weight were also very close in 2003 and ● Plastic 2005. Comparing with 2004, import in weight has de- ● Glass creased in 2005, but more expensive products started to be ● Metal imported. Import in money terms has been growing in the ● Wood, textile and other.

38 Segmentation of the consumer package can be also done by ● “Umka” carton factory the application or industry area: ● Mayr Melnhof ● Food and Tobacco industry ● Kiev pulp and paper factory. ● Consumer chemicals (pharmaceutical, cosmetic, hygiene, household chemistry, etc.) Thus, the whole demand of the carton for the consumer ● Consumer electronics, electric and other equipment package is the sum of domestic manufactured carton and ● Other (furniture, clothing and textile, shoes, hobby prod- imported carton and is about 530 thousand tons in 2005. ucts, gifts, etc.). It is quite obvious, that the substitution of the import is one The biggest consumption – about 75% of all consumer of the goals of the Russian industry. The possible volume of package is in the food sector. Most of the statistical data the new manufacturing of the coated board facilities is esti- and analytical studies are for this industry, other industries mated at the level about up to 400 thousand tons in a year. are not covered by the corresponding studies, except some This type of carton is for food industry mainly and is based very niche products. on the estimated growth of 10% - 15% for the carton package, and 20% – 25% for some of the high quality products. The most covered and available data is for the use of different materials, so one can say that the market organization is The main factor that determines the development of the per package material. This is partly determined by the his- carton package in Russia is the requirements specified by torical background and partly by the fact that there are sev- the customers who use the package. The goal of the new eral vertically integrated holdings with the whole produc- developments is to make custom made package, unique for tion chain – from the raw materials to the end product. each big customer. This stimulates the companies – package manufacturers to introduce new shapes and forms. This Utilization of packaging materials also makes the quality and features of the carton package to be more important than the price. Carton There are several products of the food industry, whose very The whole production of carton in Russia is about 2800 rapid growth stimulates the manufacturers of the package, thousand tons. The main volume is the carton for the trans- among such products are: portation package, and corrugated cardboard is the leading ● Juices in these applications. The share of the carton used for con- ● sumer package is about 10% or about 280 thousand tons. Corn flakes ● Dry mixes for children and diet food. The most important problem in consumer packaging carton products is the lack of the domestic made material and first Growth of the manufacturing of these products in the pe- of all of the highest quality. Existing deficit is about 50% of riod 2000–2005 is from 50% to 250% the whole volume and it is covered by the import. Unfavor- able balance of foreign trade of the carton for the consumer Market leader in the area of the carton package for the liq- package is about 252 thousand tons in 2005. uid food products is “Tetra Pack” whose share on this market is 75% for food products and 69% for other liquid prod- The most important importers are: ucts. Total production volumes (domestic manufacturing + ● M-Real import) of Tetra Pack in Russia is 5 bln units or 82.5 thou- ● Stora Enso sand tons in 2005.

8,1 1,8 1,3 10 Transportation carton Consumer package carton Roofing and facing carton Binding carton Other 78,8

Figure 5.9. Production of carton in Russia.

39 Flexible paper and plastic package bility in the competition. The main tools for this were the advances in quality control of raw materials, design of the Paper is used in different types of package products, among products, and introduction of the quality management sys- them the most important are: tem at the production facilities and optimization of the dis- ● Bags tribution. ● Wrap paper ● Package paper. Most of the manufacturers have passed these stages already, and most of them could arrange the mass production The most interesting is the package paper that is used for of the single type product with the adequate price and nec- the food products of different content of water and fats. It is essary quality. used for such products as milk products, confectionery, tea, coffee, sugar, salt, spices, ice cream. Now the package industry is facing the new goals, and the most important are structural changes in the industry. Wrap paper is used for the protection of the packed Driving forces for this are: growth of the volumes together (wrapped) product from the sertain conditions of the envi- with the demands of efficiency, quality and service, and ronment, UV-light for example. they come from food industry and retail.

Quite often paper is used in combination with the laminat- At the same time, significant demand is for individuality, ing plastics, that gives absolutely new properties to the protection, ergonomic capabilities, that are not achievable package materials. in the conditions of the facilities optimized to produce single type inexpensive product. Use of plastic package in Russia has a relatively short history and the current situation is characterized by the pro- Not all the manufacturers are ready for these changes. Dur- duction growth and substitution of the imported materials. ing 10 years, since 1992 till 2002 package industry was growing rapidly, as the payback time was about 3 years. Boom of development of the flexible materials in Europe Russian manufacturers experienced the lack of the avail- happened in the middle of the 20-th century, and Europe able credits due to the undeveloped bank sector in Russia was following the way of the United States. European mar- and had to buy old or even second hand equipment and ma- ket worked as an example pf the package industry for the chines. Russian manufacturers, and it helped Russian manufacturers to pass the most important stages just in 10 years, that is Now there is no such boom in the development of the pack- very fast for the normal development of the industry typical age industry, so the profitability of this business is not the for the West Europe countries. same high, so the situation will not make such inexpensive purchases reasonable. Russian companies have passed different stages in the market development, and it happened in different years for the As a result of this situation, there are more than 600 flexible different segments. package manufacturers in Russia, but only 10% of them have the possibility to produce the coextrusion films and The first stage can be characterized by the deficit of the laminates, that meet the growing market requirements. products at the market and the main goal for the companies And only 20–30 of them meet the modern requirements of was to offer any suitable product for the clients. All the ef- the market. forts of the manufacturers were aimed on the increase of the production volumes. Then the situation changed and a Leading food manufacturers and retail chains are increas- lot of offering appeared on the market. The competition ing the shelf life of the food products and are working with started, and as the market was quite price sensitive, the that package manufacturers who can provide the necessary main tool of the competition was the low price. It was nec- package properties to meet these shelf life time and the essary to manufacture the same product with the lower level of service. price or to offer new cheaper product. To do this, the companies optimized technologies, decreased the expenses and Thus, one may say that the market of the cheap and simple improved the marketing channels. flexible package is overheated, but most of the manufacturers don’t pave possibilities and facilities to produce com- At the next stage of the market development, the further plex, multifunctional package that can provide necessary progress was stimulated by the clients, who did not need shelf life of the food products. Manufacturing of these just cheap product, but started to ask for quality. Several package materials require the presence of several comple- years of development of the package industry were aimed mentary technologies. Below is the graph, that represents in the manufacturing of the quality products with keeping the distribution of companies with different amount of or growing the production volumes, and with keeping sta- technologies.

40 250

200

150

100

0 12345

Figure 5.10. Number of companies vs. number of technologies.

The situation described above took the domestic manufac- The biggest manufacturers of the flexible package (with turing to the situation when some of the flexible package is the manufacturing volume >500 tons per month) are: made completely in Russia, and some only partly. ● “ArdiPack” ● “Dmitrov Factory of Flexible Package ● “Danaflex” Material Share of Russian ● “Slavich” manufacturers, % ● “Konflex” Films for tobacco products 30 ● “Limaton” ● “MKPK” Polypropylene sheet 100 ● “Multiflex” Film and sheet for blisters 85 ● “NTL-Upakovka” ● “Ohta” Oriented polystyrene films 0.8 ● “Paketti Group” Twist composite with printing 100 ● “Polypack” (a part pf GOTEK group) ● “PO Plastic” Twist films with printing 100 ● “Polygraphoformlenie-Flexo” Coated micro corrugated board 0.6 ● “Realplast” ● Micro corrugated board boxes 100 “Slavnika” ● “Slavpack” Paper bags with printing 100 ● “Technopolymer” ● Intaglio print on the package 15 “Uniflex” materials ● “Uralplastic” ● “UralTraverspack” Flexographic printing on polymer 85 ● “Fabrika Upakovki” films ● “Flexoland” Mask materials with printing 90 ● “Flexoprint” ● “Flexo-Service” Polymer bags 100 ● “FG Packaging” Laminated paper with print 100 ● “Edas Pack” ● “Ekort Pack” and other. Carton package with pronting 100 Thermocontractable film, 1 layer 1 The structure of consumption of flexible package (accord- Thermocontractable film, 3 layers 60 ing to the type of material) studied by Abercade Consulting and is Table 5.1.

41 Table 5.1. Shares of flexible package material.

Type of package Consumption (in tons) % of all package

Paper 356 thousand 54.3

Film 252 thousand 38.6

Tapes 46 thousands 7.2

The leader of the flexible package consumption is food industry, the shares of other industries is in the Table 5.2.

Table 5.2. Distribution of flexible package among industries. Data by Abercade Consulting (2003)

Industry % of all consumers Consumption, % of consumption of of flexible package thousands tons flexible package

Pharmaceutical 8 253 38.6

Milk 19.5 154 23.5

Bakery 24.3 81.9 12.5

Petrochemical 6 33.4 5.1

Tobacco 6.4 26.8 4.1

Meat 9.2 25.5 3.9

Confectonery 4.8 22.9 3.5

Canned food 7.2 21.6 3.3

Metallurgy 5.2 19.0 2.9

Machine building 3.6 13.7 2.1

Grain processing 2.4 1.9 0.3

Most popular plastic films that are used in Russia are made The structure of consumption of flexible plastic package in of polypropylene, polyethylene and porous multilayer different industries is given in Table 5.3. films, their shares are: ● polypropylene – 29% It is interesting to mention the difference in positions of different industries in Table 2 and 3. It means that there is a ● polyethylene 18% big difference in the consumption of different package ma- ● porous multilayer – 22%. terials in different industries. Thus. pharmaceutical industry has high position in the consumption of flexible pack- The share of inexpensive polystyrene and single layer films age in general, but it’s share in consumption of plastic ma- is decreasing. The reason is that new, technologically more terials is much smaller. advanced films are better in properties and are cheaper. The tendency of next years will be in the use these new materials more and more.

42 Table 5.3. Consumption of consumption of flexible plastic package in different industries.

Industry Consumption (1000 tons) % of all consumption

Milk 141.0 55.9

Bakery 46.1 18.3

Confectionery 20.6 8.2

Canned food 18.9 7.5

Tobacco 10.6 4.2

Petrochemical 5.3 2.1

Cosmetic 4.0 1.6

Meat 2.27 0.9

Pharmaceutical 1.26 0.5

Beverages 1.0 0.4 Data by Abercade Consulting (2003)

Rigid polymer package sia. At the same time, there is practically very small growth of the glass cans consumption, about 9% of the total growth The following products are assumed when speaking about in the period of 2000–2004. rigid plastic package – volume products and caps. The shares of consumption of glass package by different The most popular material is polypropylene; it is used in industries is given in the Table 5.4. 44%, and polystyrene – 38%. Significant part of the manufacturers use oriented polystyrene, their share in produc- Table 5.4. Consumption structure of glass pack- tion is 13%. Other materials, such as PVC, PET have the age. share of about 5%. Product Share in glass Most of the manufacturers (about 70%) produce such prod- package ucts as plastic boxes, bags and glasses. with the shares of consumption, % 36.4%, 21.6% and 10.2% correspondingly. Significant part is for plastic jars. Beer 62

The rest share belongs to the different products, such as Strong alcohol 19 barrels – 3.4%, 5.7% – different volumes, 6.8% - contain- Soft drinks 4 ers, 1.1% – pallets, 4.5% – bottles, 4.5% – canisters, 2.3% microcontainers, tubes – 1.1% and flasks – 1.1%. Wine 3 Mineral water 3 Glass Wines, stronger than 20% 2 Russian market of glass package is fast growing and the average annual growth in the period of 2000–2004 was about Milk products 2 17.4% Fruit wine 1

The main type of products are glass bottles for food products, their share is over 87%. The total volume of the Rus- The biggest manufacturers are: sian market is 8.1 bln glass bottles in the 0.5 liter equiva- ● lent. 13% of the market are for the glass cans in 0.5 liter “RKM” holding (3 glass factories) equivalent, that is about 1.2 bln cans. ● “Russian-American glass company” (3 factories) ● Sisecam Fabrikalari (Turkey), (2 factories in Russia) The main driving force for the growth of the bottles con- ● “Stekloholding” sumption is the increase of the beer manufacturing in Rus- ● “Mitara”.

43 The structure of domestic manufacturing is: 5.5 Marketing and Distribution ● 0.5 litre glass bottle – 41% Channels ● Other – 21% ● 0.25 litre Exclusive glass bottle – 18% Marketing of the package products are usually made using ● 0.25 litre glass bottle – 13% all possible ways of modern b2b communications. Among ● 0.5 litre Exclusive glass bottle – 7%. them are: ● Exhibitions and fairs The biggest import to Russia is from the following coun- ● Advertising in the industry resources – magazines, web tries: portals ● Special events – seminars, industry meetings, activity Ukraine – 28%, Poland – 27%, Finland – 15% and Czech around official events Republic – with total volume of 70% of imported to Russia ● Direct b2b contacts. glass package. The leading exhibition of the package industry is “Rosupak” annual exhibition made in Moscow each sum- 5.4 Packaging Design mer:

Packaging design is a fast growing industry, stimulated by the following reasons: ● Major world food and consumer goods manufacturers came to Russia with their products ● Real competition start made the package an important th part in the product advertising and promotion Rosupak – The 12 International specialized exhibition: ● Start of the modern retail chains stimulated the growth of Packing machinery and technologies; equipment for manu- the package design role in the merchandising facturing of packages. Packaging materials; tare and auxil- ● Start of the manufacturing by international manufactur- iary packaging means. Warehousing and logistics, han- ers increased the demand for the modern design of the dling equipment. Packages for all industries. package from the domestic manufacturers. Exhibition Director Design of the package is located mainly in the hands of the Natalya Konovalova package manufacturers, who are mostly interested to de- Tel./fax: +7 (495) 105-3481 velop new forms of the package attractive to the big and E-mail: [email protected] medium clients. The main goal is to make individual package that is different from all other offering at the market. http://www.rosupak.ru/defaulteng.stm This is stimulated by the competition between local consumers of the package The most advanced industry portal: www.unipack.ru is a place for industry news, articles, advertising and b2b con- Another driving force to the package design is the demand tacts. English version is available at: from the retail chain to the shelf life of the food products, http://www.unipack.ru/eng/ when it is necessary to increase the shelf life. This stimulated the development and use of the modern package ma- The leading specialized magazine is “Tara I Upakovka”, terials. http://www.magpack.ru/en/index.html : ● "TARA I UPAKOVKA", informational analytical and Nevertheless, most of the package developments come science-practical magazine, appearing every two from abroad, either in form of the new equipment import, months, is a unique opportunity to enlarge business and or by import of the already made materials. Russia is cur- advance your production on the Russian market. rently following the development of the package design that European countries has already gone. ● "TARA I UPAKOVKA" accomplishes informational and business contacts between producers and consumers Design of the package appearance (images, colors, etc.) is of packaging products, technologies, machines and usually made either by the company - package consumer or equipment. by the company – package manufacturer, or by the inde- ● "TARA I UPAKOVKA" informs the reader about the pendent studio. latest and brand new technologies in packing, packaging and labeling of food products, beverages, perfumery, It is quite common to see, that the companies are arranging household liquids etc. a tender for the package artistic design. The leading studio ● "TARA I UPAKOVKA" is an organizer and sponsor of of the design (not only for package) is the “Studio of the largest packaging exhibitions in Russia, participant Artemy Lebedev”. of different international specialized exhibitions.

44 ● "TARA I UPAKOVKA" was established in 1990 and did not give the common understanding of content of the may be received by subscription or direct delivery in law. Russia and abroad. Now the development of the law is in the hands of Duma Magazine’s technical caracteristics (Russian parliament), and is discussed in the Committee of Periodicity – 6 issues in a year. the Ecology. Format 210x290 mm (A4) Volume - more than 100 pages. There is a wide discussion of the waste treatment in general and used package in particular in the different circles of “TARA I UPAKOVKA” MAGAZINE address: Russian society, especially in the big cities. Several at- 11A,st.4, M.Semenovskaya, tempts were made to arrange the separate collection of the Moscow,107023, Russia different materials, such as glass bottles, plastic bottles and Tel./fax: +7 (495) 964-01-80, (495) 644-04-02, paper, but it looks like that necessary resources were not al- (495) 644-04-03 located and these attempts were not successful. Neverthe- E-mail: [email protected] less, one may see that the special containers for the different waste materials were filled by people, and if the collection system will be arranged, people will use it at least in big cities where people have better understanding of the 5.6 Requirements of End Users ecology in the modern life.

Manufacturing companies ● Good protection of the product ● Good marketing capabilities support (nicely looking, at- 5.8 Competition on the Consumer tractive, “catch the eye”) Packaging Market ● Easy manipulation ● Easy stock Competition on the package market has a very short history ● Long shelf life. and appeared as soon as the very preliminary demands in the package were satisfied by the packaging companies. To Logistics companies do this the companies used every possibility to arrange new ● Durable production facility, so the technical level of the package ● Easy manipulation manufacturers is very different. One can meet very tradi- ● Well protected and readable marking tional and simple package and the most advanced technolo- ● Low costs for manipulation. gies made at the highest possible levels.

Consumers The competition is also influenced by the general economy level of the industry or price niche of the product to be ● Convenient, easy handling (“from shop to dustbin”) packed. There is a room for modern, efficient and cost ef- ● Good protection, safety of content storage against me- fective package, but the competition in the low end seg- chanical damage or unapproved opening ment of the simple package is high and it is hardly possible ● Clear information (easy identification in the shops, in- to expect any possibilities in this segment. formation easily readable) ● Protection and easy check of frauds (special marking, unique design). Expert’s opinion links the development of the package industry with the overall advance in the Russian economy. Forecasts are quite positive, so there will be definitely new room for technologies, equipment and products. 5.7 Package Recycling General tendency for the last years is the substitution of the Recycling of the package in Russia is mostly a part of the imported products by the domestic made. This is well con- general waste treatment. Till now there is no any special firmed by the fact that there is quite a big difference, who is law that regulates the use of package and used package offering equipment and who is offering package products treatment. at the biggest exhibition “Rosupak”: equipment is mainly offered by the foreign companies (most active are compa- The development of such law has started in 2001 and has nies from Germany and Italy) and package products are the corresponding laws in the West Europe countries as the mostly offered by domestic manufacturers. Packaging ma- example. Discussion of the legislative authorities made on terials are offered partly by local manufacturers and partly this subject at the beginning of 2000’s were not fruitful and by importers or foreign manufacturers.

45 5.9 Local trends in the Consumer Weak signals Packaging Market (in relation to ● Demand for more safe package that can protect the food development of the society) products better and more reliably. ● Better barrier properties between content and environ- Qualitative trends are following the development of the ment European market that Russia still has to follow. Growth of ● Easy utilization of the used package. domestic production and it’s competition with the im- ● Convenient package. ported products sets the quality requirements to the modern European level. 5.10 Players in the Consumer It is expected that the consumption of the package materials will grow at lest till 2010 and there will be different Packaging Value Chain growth in different package materials – from small or almost no growth in glass and wood package to the 15% - Value chain 20% growth in modern plastic materials. The main stages are: ● R&D organizations (mostly foreign) develop new pack- Anticipated overall trends age materials and package types in close contact with package materials manufacturers and package manufac- Most of the companies – market leaders are announcing the turers. construction of the new facilities. Alcan, Stora Enso, SCA, ● Raw matererial producers supply the package materials TetraPak, Amcor, Rexam and other are planning to expand manufacturers with the raw materials their production facilities in the next years. ● Package materials manufacturers supply package manufacturers End users will definitely prefer more convenient package. ● Package manufacturers produce the package for brand For food products this means the possibilities to open eas- owners in close contact with design departments of ily, close easily and manipulate easily. brand owners or independent design companies or design new package by themselves. Small package will grow in demand as long as more people will look for fresh products.

The share of consumption of package by food and tobacco industry will be kept as about 75% of all consumer packages.

Package materials Package Big international manufacturers manufacturers brand owners

Raw material Independent producers design companies Art design companies Brand owners Design departments of packaging or brand owners companies R&D organizations

owners – Foreign; owners – Domestic;

Figure 5.11. The diagram represents the relations between the participants of the value chain.

46 Phases of value chain

R&D → Raw → Design departments of → Packaging → Consumer organizations materials packaging or consumer producers goods producers goods producers producers Independent design companies Design companies

Market players ● “Arkhangelsk Pulp and Paper Mill” ● ”Kondopoga” factory. Research & development institutions ● “Scientific-Research and Experimental Design Institute Producers of non-fiber-based packaging materials of Package” – state owned Institute with the long history Plastic materials producers (raw materials) of the soviet period, head organization of the package ● “Tomsk neftechim” – polypropylene development at that time. ● “Ufaorgsynthez” – polypropylene ● “All-Russian Scientific-Research Center for Standard- ● “NefteChimiya” – polypropylene ization, Information and Certification of raw materials, ● “KazanOrgSynthez” – polyethylene materials and substances” (VNICSMV) – state-owned ● “Sibur Neftechim” – polyethylene organization, part of the “Federal Agency for Technical ● Nizhnekamskneftechim” – polyethylene, polystyrene. regulation and Metrology” has department of industry ● “Salavatnefteorgsynthez” – polystyrene and package and is a head organization for standardiza- ● “Polystyrol” – polystyrene tion of the materials used for package (among other ● “Plastic” – polystyrene tasks). ● “Angarski Zavod Polymerov” – polystyrene. ● Research Center of “GOTEK” group of companies. ● Package Departments of the corresponding scien- Metal producers tific-research institutes – has left from the soviet period ● “SUAL” – aluminium of the package industry. ● “Rusal” – aluminium ● “Alcoa” – aluminium Current situation with R&D in package industry is charac- ● “Magnitogorsk” metallurgical plant – tin. terized by the almost insignificant role of “old” structures, Glass producers (glass bottles and cans) such as an array of different state owned scientific-research institutes of the food industry. Modern industry of package ● “RKM” almost don’t need any support of the R&D organizations at ● “RusskoAmerikanskaya stekolnaya Kompaniya” the current stage of the market development, as is focused ● “Sisecam Fabrikalari A.S.” mainly on the production facilities development and intro- Brand owners duction of the technologies and materials already existing on the Western European market. Food Producers ● “Baltika” – brewery Roundtable arranged 5 October 2006 under initiative of ● “Wimm Bill Dahn” – food manufacturer (mostly milk the “Tara I Upakovka” magazine with the participation of products) the market leaders and scientists of the former soviet scien- ● “Lebedyansky” – juices, child food tific-research institutes was the very first event of such kind ● “Razgulyai-Ukrros” group of companies – agricultural during last years and the main topic was how to bring the production and processing results of R&D to the domestic package industry. To do ● “Cherkizovsky” – meat products manufacturing. this, the participants of the Roundtable agreed to establish Non-Food Producers the “Committee of development of R&D and analytical Work in Package industry”, and arranged the workgroup ● Pharmaceutical companies of the interested organizations to start this work. – “Microgen” – “Farmstandard” Producers of packaging raw material – “Otechestvennye Lekarstva” – “NizhFarm” Fiber packinging producers (raw matewrial) – “Verofarm” ● “Ilim Pulp Enterprises” – “FarmCenter” ● “Mondi Business Paper Syktyvkar” – Markiz-Pharma”

47 ● Cosmetics producers ● Common system of rules and tests for obligatory test of – “Kalina” correspondence – “Faberlic” ● Common application of the requirements independently – “Nevskaya Kosmetika” of the deal type ● Household chemical products producers ● To avoid limitation of competition in the area of accredi- – “”NovomoskovskBytChim” tation and certification (owned by Procter&Gamble) ● To avoid simultaneous accreditation and certification in – “Pemos” (owned by Henkel) one hands – “Nefis” ● To avoid non-budget financing of the control bodies. – “Aist” – “Henkel-Ug” As creation of the completely new system of documents ac- – “Henkel-Era” cording to the “Technical Regulation” requires an ex- ● Clothing, textiles, shoes and leather products producers tended efforts and time, the current system of GOST’s still ● Furniture producers exists and is operable. Moreover, new GOST’s are devel- ● Consumer electronics (including PCs etc.) producers oped and implemented. ● Household electric appliances and lighting systems producers A set of GOST’s are describing the package materials and ● Accessories (crockery and cutlery, applied art products, are now used by the Russian companies. The confirmation etc.) producers of the fact that the material follows these GOST require- ● Private Label Owners ments is made by the certification bodies (currently there – “X5 Retail Group” – “Pyaterockka” and are a lot of companies that are authorized to make neces- “Perekrestol” food retail chains sary tests) and the so called “Certificate of Correspon- – “Aushan” food retail chain dence” is issued. – “Seventh Continent” – food retail chain – Ikea MOS” – “IKEA” As the most of package materials are in the contact with – Ramenka” – “Ramstore” food retail chain food, there are Hygienic norms for these materials that reg- – “Stockman”. ulate the maximum extracted values of different chemicals:

Hygienic Norm GN 2.3.3.972-00 “Hygiene of Food. 5.11 Local Regulations Effecting Packing, crockery, package, equipment and other products that are in contact with food. Maximum allowed amounts the Use of Packages of chemicals that are extracted from materials contacting with food products” Russia is currently passing a very important transition period of the changes in the regulation. Like for GOST correspondence, hygienic certificate is given by the authorized organizations on the base of the During the Soviet period an extended system of GOST’s – tests and the “Hygienic Certificate” is issued. national standards was developed and it covered all areas of the manufacturing in Soviet Union. During the transition period of economy since 1991 it was found that there is a Another important document that describes the informa- need to change the existing system to more flexible and tion that must be put on the package is GOST R suitable to new economic developments. 51074-2003 “Food Products. General Requirements. In- formation for Consumer”. This standard describes in every The main change is to elaborate the following principles detail what information must be put on the package of the and requirements of “Technical Regulation” as a substitu- food product to inform the customer about it’s name, prop- tion of GOST system: erties, storage time and manufacturing date, origin, who is ● Application of common rules to the requirements for manufacturer and many other aspects. products, manufacturing processes, use, storage, transportation, sales and utilization, making the work or ser- Development of regulations vices provision ● Correspondence of technical regulation to the current It is hardly possible that the national standards and require- level of national economy development, scientific and ments to the package in Russia will be harmonized with the industrial development European norms. Current situation is that Russia does not ● Independency of the certification and accreditation approve European Acts as valid on the territory of Russia, bodies and requires the certification when the products or materi- ● Common system and rules of accreditation als are imported to Russia.

48 There is also a big discussion in the society of the “Techni- ● Fake clothes that imitates the products of the inter- cal Regulation” system; there are a lot of concerns that the national brands new documents will not be the same strict as previous ● Fake cosmetics and perfume (imported from South GOST system, and there will be less control of the food East Asia) manufacturers. ● Fake dry mixes for construction.

End user opinions development regarding Most common tools of protection against regulation of package use product fraud and their development The most of the end user’s concerns are related with the Package is an essential part of the protection against frauds. quality of the products, and food products especially. The The following methods and technologies are currently used safety and reliability of the package is going after this con- for these purposes: cern, and speaking about package, the durability and reli- ● ability of the package is the most important for the end us- Patenting of the package design and trade marks, exist- ers. ing legislation already gives the necessary tools to protect trade marks in the court ● Another is the concern about the information, given at the Holographic marks, other technologies like micro- package. Although there is a GOST R 51074-2003 that was printing, special inks to put the mark. adopted in 2003 and describes in details what information ● Excise-duty marks for alcohol and tobacco products for consumers must be put in the package. ● Serialization of the package ● Some companies often change the package design so the pirates can’t follow these changes too quickly. Local regulation on the recycling ● “Hot Line” organized by the manufacturers, consumer Russia is producing about 180 mln m3 of domestic solid can make a call to check is the particular product really wastes, and food package is about one half of it (paper, manufactured by the brand owner or is it a fake. Some metal, board, glass, plastic, etc.). Only 3% of it goes to the manufacturers of the medicines arrange web portals with recycling, the rest of them are either burned or buried at the a possibility to check if the particular series were really special areas. A lot of land is used for these purposes, and it imported to Russia. is too much.

Nevertheless, the law on the package and used package Public organizations against products fraud treatment is not adopted yet, and it is hardly possible that it and their vision of package development will be done during nearest future. The most active are the new public organizations that are aimed in the protection of the consumer’s wrights. They are quire young and the effectiveness of their actions and the influence on the products frauds are still to be devel- 5.12 Package as a Tool against oped in future. Product Frauds “Society for the Protection of the Consumer Rights” The most typical cases of the food products frauds as cov- (www.ozpp.ru) is assisting in the expertise making in cases ered by media and industry resources of the improper quality of the products or services, helping ● Fake products manufactured illegally. Most often it is consumers to check the actual quality of the products. vodka, meat and milk products, souces, glass cleaning liquids for cars, other home chemistry. National anti-pirate association “Russkij Szchit” (Russian ● Use of the brands with small changes to imitate the ap- Shield) was established by Russian software manufactur- pearance of the logo, package design (font, colors, pack- ers to coordinate the activity against software pirates. This age shape, etc.) association works in a close contact with law-enforcement ● Medicines manufactured with the illegal use of inter- bodies. national brands ● Fake medicines without any content of the active The main tools that are named are the special marks (stick- substance. ers, labels) that are difficult for copying by pirates and can ● Software pirates be easily checked by the potential consumer at the point of ● Fake car parts sale.

49 6 Vision of the Packaging Market in Eastern Europe

Consumer packaging market in Eastern Europe is growing ● Overcapacity in some countries of the region, focus on strong (5 to 20% annually). The lower the usage of pack- growing export of packages ages is, the higher is the expected growth. In Russia the us- ● Focus on environmental questions and recycling will be age of packages per capita is about 80 kg. In Poland about stronger especially in EU member states. 92 kg and in Czechia about 83 kg (In Finland over 400 kg). ● Focus on convenience for end users is growing This means that the growth potential is biggest in Russia ● The selling function of packaging is growing and Czechia in terms of absolute volume and in terms of ● Food industry is the biggest and most demanding con- usage per capita. sumer of packaging ● Green light for intelligent packaging. The future of packaging market in Eastern Europe can be described as follows: It is expected that the trends from the Western Europe will ● Relatively high number of players (5000 in Poland and expand to the Eastern Europe. Russia will keep her own 1000 in Czechia) on the market regulations, but the regulations of EU will gradually be ● Concentration of volume to biggest players adopted also in all new EU member states. This makes ● EU member states in different position as non EU states Russia an especially challenging and promising packaging ● Packaging market is a playground for international play- market, where the local manufacturers will continue to ers, but local manufacturers can also be strong have privileges and advantages against foreign importers.

50 Tekes’ Technology Reviews in English

212/2007 Consumer Packaging in Poland, Czech Republic and in Moscow Area. 50 p.

207/2007 MASI Technology Programme 2005–2009. Yearbook 2007. Eija Alakangas & Pekka Taskinen. (eds.)

206/2007 Update of GIGA-VAMOS – Technology Roadmap. Mikael von Hertzen, Juhani Timonen, Pekka Huuhka. 93 p.

205/2007 Seizing the White Space: Innovative Service Concepts in the United States. Peer Insight. 76 p.

202/2007 Five Steps for Finland’s Future. Pirjo Ståhle (ed.). 42 p.

200/2007 Innovation, Journalism and Future. Erkki Kauhanen and Elina Noppari. 88 p.

196/2006 E-Business Logistics Visions, Innovations and Research. ELO – E-Business Logistics Technology Programme 2002–2005. Heikki Kekäläinen (editor). 91 p.

191/2006 MASI Technology Programme 2005–2009. Yearbook 2006. Eija Alakangas & Pekka Taskinen (eds)

184/2005 Globalisation of R&D. Part 1: R&D in a Global World, and Part 2: R&D in a Global Economy.

182/2005 Research training and national innovation systems – Finland compared to Australia and the USA. Sandra Haukka. 154 p.

179/2005 Pharma development in Finland today and 2015. (Updated version of review 163/2004) 78 p.

177/2005 Best Practices in Innovation Policies. Heikki Kotilainen. 92 p.

172/2005 Business Cycle Effects on Start-Up Finance in Finland. 47 p.

171/2005 Technology Based Entrepreneurship and Regional Development in Finland. 51 p.

167/2005 Mobilizing Business Applications – A survey about the opportunities and challenges of mobile business applications and services in Finland. Petteri Alahuhta, Jari Ahola, Hannu Hakala. 46 p.

165/2004 Utilisation of Large Finnish Study Cohorts in Genome Research. Kirsti Käpyaho, Leena Peltonen-Palotie, Markus Perola, Tero Piispanen

163/2004 Pharma development in Finland today and 2015. Malin Brännback, Markku Jalkanen, Kauko Kurkela, Esa Soppi

162/2004 ROADMAP for Network Technologies and Services. Petteri Alahuhta, Marko Jurvansuu, Heikki Pentikäinen. 104 p.

158/2004 Microfluidics. Pasi Kallio, Johana Kuncova. 32 p.

157/2004 Proteomics – Challenges and possibilities in Finland. Heini Koivistoinen, Harri Siitari. 35 p.

156/2004 Finnish Software Product Business: Results from the National Software Industry Survey 2003. Juhana Hietala.

150/2003 Towards a Supercluster: Chemical and Biochemical Innovations Connecting Finnish Clusters.

149/2003 Managing Non-Core Technologies: Experiences from Finnish, Swedish and US Corporations Annaleena Parhankangas, Päivi Holmlund, Turkka Kuusisto. 76 p.

147/2003 Innovative waste management products – European market survey. Christoph Genter. 40 p.

145/2003 The Finnish Maritime Cluster. Mikko Viitanen, Tapio Karvonen, Johanna Vaiste, Hannu Hernes- niemi. 187 p.

Subscriptions: www.tekes.fi/english/publications Consumer Packaging in Poland, Czech Republic and in Moscow Area

Jari Makkonen, Jaroslava Habstová, Josef Král, Ewa Kicinska, Juha Rautalahti, Dmitri Makolkin, Tarja Päivärinne, Antti-Jussi Heilala

Technology Review 212/2007 Consumer Packaging in Poland, Czech Republic and in Moscow Area

Technology Review 212/2007

The Finnish Funding Agency for Technology and Innovation Kyllikinportti 2, P.O. Box 69, FIN-00101 Helsinki, Finland Tel. +358 1060 55000, Fax +358 9 694 9196, E-mail: [email protected] www.tekes.fi

ISSN 1239-758X August 2007 ISBN 978-952-457-378-8