Non-oral business to drive Essel Propack's margin

Sustained focus on non-oral care packaging has helped firm boost segment's share in revenue to 42%

Global packaging major Essel Propack Ltd (EPL) sees non-oral care categories such as pharmaceuticals, cosmetics, fast moving consumer goods (FMCG) and food as major growth drivers, going forward in the laminated tube business. The company expects this to happen through offering innovative products and packaging solutions in lieu of the traditional plastic/aluminum tubes and plastic/glass bottles.

Sustained focus on non-oral care packaging has helped EPL boost the segment's share in revenue to 42 per cent. In the years ahead, increased awareness among customers about the superior barrier properties and decoration capability of the laminated tubes is expected to open up several non-oral-care brands for Essel Propack's new range of tubes.

"Being a leader in the laminate technology, we are constantly looking to expand our presence globally in the tube space through innovative new products for the non-oral care brands. We are open for both inorganic and organic growth opportunities as long as they meet our value creation criteria," said A V Ganapathy, Chief Financial Officer, EPL.

Meanwhile, its non oral care category consisting of beauty & cosmetics, pharma & healthcare, food and home applications represent a market opportunity of over 22 billion tubes valued at over $2.5 billion. EPL with operations in 11 countries and 21 manufacturing units is well positioned to leverage this opportunity and seek to increase the revenue share of non oral care cateogory to 50 per cent in the next couple of years.

In the recent past, the company has been growing largely through brownfield or greenfield investments. However, the company is not averse to pursuing inorganic growth as it had done in the past during early 2000s. The company has been spending every year an amount broadly equivalent to annual depreciation charge towards capex required for supporting its growth strategy. The annual depreciation amount is around Rs 150 crore.

"We aim to have a 50:50 share of revenue coming from the oral and non-oral business by 2020 and expand our non oral care business across geographies," added Ganapathy

Last year the company announced the divestment of their India flexible packaging business for an enterprise value of Rs 165 crore in order to focus on the growth opportunities emerging in the tubing space.

"Growing youth population with increasing aspirations is driving demand in the Cosmetics category. For example emerging products such as anti ageing creams, BB Creams, CC Creams, Hair Colorants and Hair Care system are fast expanding in this category. In the food category too tubes are becoming increasingly popular as with condensed milk, wasabi paste, peanut butter, jams and sauces especially in Europe and China. The growth in demand is now being driven by factors such as convenience, ease of use and dispensers. The company is continuously working to sway people and companies to shift to more efficacious tube packaging from traditional bottles and jars that are prevalent today," said Ganpathy.

EPL currently employs over 2700 people representing 25 different nationalities and sells more than six billion tubes every year. The company holds 36 per cent of the market share in the oral care segment in terms of volumes.