International Paper taps digital technology to boost business

Recently launched a smart card, facilitating direct transfer of money to bank accounts of its farmers, along with a website to educate farmers

With consumers taking the e-way and the economics of growing trees getting tougher by the year, the paper industry is fraying at the edges. However, paper companies are not folding up. They are reinventing and innovating to not just float, but surf the challenges.

International Paper APPM Limited (IP-APPM), a part of International Paper in India, has already dismantled the proverbial box and joined hands with its perceived nemesis — digital technology — to shore up its business.

It recently launched Rythukosam Smart Card, which it claims to be the first in the paper and pulp industry, to facilitate direct transfer of money to the bank accounts of its farmers. The company also launched a portal — www.rythukosam.com — that complements the smart card scheme to educate farmers on the best practices in tree growing.

These initiatives, says Rampraveen Swaminathan, chairman and managing director of International Paper APPM Limited, will bring the company closer to its farmers and help in beating the headwinds.

The smart card, apart from connecting the farmers with the company, also offers the farmers tailored information and a high-level of customised technical support. The farmers also get to earn loyalty points, financial credit, and rebate on future pricing. The company plans to network up to 55,000 farmers through the smart card. "We are expecting the smart card to also help increase productivity," he says.

The company's revenues remained almost flat at Rs 1,153 crore in FY2015 from Rs 1,104 crore in 2014, when it was in the red. It brought down the cost of materials consumed to Rs 459 crore from Rs 465 crore, helping it considerably narrow the losses to Rs 7.4 crore from Rs 56.4 crore before tax and exceptional items. Post tax and exceptional items, the company managed to swing back to the black, posting a thin net profit of Rs 24.8 lakh, from a net loss of Rs 41.6 crore.

"The challenge is not to teach the farmers to grow. The challenge is how you can do it in a more cost-effective and sustainable manner, and it's here that the portal would be a big catalyst. For instance, since wood has a longer growth cycle, the portal educates on and encourages farmers to practice inter-cropping with cash crops like okra and chillies. This economically empowers the farmers during the long-cycle," says Swaminathan. The portal also shares information on soil, species and spacing among others.

Contrary to the notion that it takes time to motivate farmers to go digital, Swaminathan says the adoption level of farmers is high. "This is encouraging us. We plan to invest Rs 4 crore to Rs 5 crore a year in the initiative. Farmers do not have an adoption problem, but have acceptance problem. They adopt and discard easily, if we do not show them value. So, we have to constantly keep innovating."

The past couple of years were muted for the paper industry. From a growth rate of 8 to 9%, it has come down to 2 to 3%. "It is a difficult environment but it is turning around. Wood prices have started leveling off so we are not running behind the curve as in 2013," he says.

The growth is being mainly driven by within the paper industry. The packaging business is seeing good growth, fueled by FMGC and e-commerce sectors. The cutsize division is seeing a growth of 10 to 12% but publishing like art paper, greeting card isn't growing as expected.