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Rolls of tubular and laminated carton packaging material were fed through filling equipotent, sealed etc. The company’s most popular package had a rectangular shape that was easy to stack and shrink-wrap on pallets.

Tetra Paws aseptic technology protected food and allowed dawdles to sell long shelf-life products. Tetra Pack’s packaging systems consisted of the supply of both pre-printed rolls of carton packaging material and the filling equipment. The equipment was sold or leased. In addition, Tetra Pack offered its customers technical service to maintain production machinery, improve efficiency and avoid downtime.

In the low-margin milk business, customer profitability was closely tied with operating efficiency.

Declining Market and Increasing competition Tetra Pack grew rapidly through the ‘sass but growth slowed in the asses Tetra Pack held 80% share of the world’s aseptic carton packaging market where its technology was decidedly superior. Tetra Pack’s share of the more competitive and lower margin non-aseptic carton market was 32%. Non-aseptic cartons, accounting for 42% of all carton packaging, were used for pastured products with short shelf- life and requiring refrigeration. Approximately 14% of all liquid foods were packaged in cartons versus 35% packaged in plastic containers. Demand for plastic packaging was growing due to a lower packaging material cost for some, and greater shape flexibility for others Milk packaging accounted for 57% of total Tetra Pack sales. Worldwide milk consumption grew from 213 billion litter in 1995 to 236 billion liters in 1999, representing a 2.

5% annual growth. During the same period milk consumption in Western Europe, Tetra Pack’s biggest market, declined from 31 billion to 30 billion litter. In stagnant of declining markets production rationalization was leading to concentration among dairy companies. Strategy To grow, Tetra Pack acquired Alfa Lava, a food-processing equipotent manufacturer, and expanded into the growing plastics packaging. Cartons, however, continued to be Tetra Pack’s core business.

Altogether, the company sold to more than two thousand liquid food customers around the world that together filled an estimated 250 million Tetra Pack carton packages a day. Due to switching costs, Attacking Tetra Pack’s leadership in cartons with comparable aseptic products and yester. Combine and Eloped, the main European carton competitors also expanding into plastics, competing against Sided and Crown Cork & Seal, the leaders in this sector. As number two in carton packaging, Combine was fast, flexible and aggressive – cutting prices, developing new package sizes. Estimated that with 9% overall growth in 1999, Combine grew by 4% in Western Europe, 22% in Eastern Europe, and 30% in Asia; reputed to win customers by aggressive prices.

Tetra Pack: Decentralized and Entrepreneurial, employees for long-term careers, strong cooperate culture.

Tetra Pack Italy and Italian Market Trends Like many Tetra Pack market companies, Italy had sales and marketing units that collaborated closely. The salesperson led the customer relationship, maintaining daily customer contact and discussing and resolving marketing, sales, technical support, machine maintenance, and financial issues. Italy was one of only a few Tetra Pack companies with a key account management structure – promote a closer working relationship with those strategic customers that enjoy a high quality of management, were innovative in marketing, and willing to invest for long-term étagère growth. Tetra Pack sold to the top three players in the Italian milk market: Pointer, Indiana, and Fill. Unlike Pointer, the other companies also bought from Tetra Packs competitors.

Tetra Pack’s marketing unit worked closely with the customer’s in-house marketing group by analyzing the market and offering advice on product launch strategies, advertising and promotion. Such advice often exploited Tetra Pack’s global knowledge base in liquid foods, a feature that was unique in the industry. In 1999 Italian producers sold 3,990 million litter of milk annually.

The milk arrest was segmented into four product categories: Full fat; Semi-skimmed; Skimmed; Enriched. The market peaked in 1997 and had since declined gradually due to a lower birth rate and an aging population consuming less dairy products. Other Italian market trends Declining homes with children under 15 Growth of alternative beverages, including soft drinks, among youth.

More “health-minded” consumers among adults. Expanding number of price-active hypermarkets in food retailing. Increasing competition for shelf space. Increasing private label milk sales Thin and declining margins in branded milk.

Approve 8% of Italian milk was packaged by Tetra Pack, one of the highest penetration rates in the world.

Tetra Pack sold to all the major producers, with a different sales person looking after each account. Tetra Pack worked closely with Italian customers to differentiate their products and brands by distinctive packages/ label designs. Each new package required customer investment in new machinery- “specific products for specific needs” was credited with the growth of value added categories such as skimmed, semi-skimmed and enriched milk. Pointer Pointer – Tetra Pack’s top Italian Customer Bought 1 billion packages a year. 0 million EURO in consolidated 1999 sales. Analyzed the market data and saw an opportunity for new Juice products.

Opponent’s advertising theme: “Quality: It’s Natural”. Dismissing enriched milk as a ploy to confuse consumers, Pointer launched a massive TV advertising campaign to make consumers leery of the new “artificial milk”. In one TV commercial the company asked “Would you add vitamins to an orange? Why in milk? ” The company’s market share had dropped by 2. 5% in one year, leading to a decline of more than 56 million EURO in milk sales.

To regain share and margins, the company was undertaking a number of assure: Investing 5 million EURO in advertising Driving the market from full fat to skimmed/semi-skimmed, held the leading position with 25% share Charging premium prices for its quality-positioned brand. Maintaining extensive national distribution.

Tetra Pack’s Analysis – why they suggested enriched milk Pointer was perceived as the best quality brand in the market by 70% of consumers. This percentage had grown from 60% a year earlier. Pointer had lost equiv of 2. 5 million liters of shelf space to its competitors over the last 18 months. Opponent’s market share declined by 2. % in one year while the shares of its top two competitors increased by approximately 1.

5% each. Tetra Pack believed that the increases were due in part to the rise in sales of enriched milk by competitors. Pointer had lost share among homes with children while its competitor Indiana had gained share in this important segment (exhibit 8) While Pointer maintained premium prices, margins on sales were declining. Reasons to go for enriched milk: Category was growing, profitable and appealed to all age groups. Opponent’s entry would bring added vitality and growth to the category. Enriched product ruinations were difficult to copy by private labels.

The proposal meant additional business for Tetra Pack and growth potential for whole milk category. Next Move Important to nurture Pointer – retain as one of the company’s largest and most successful customers. Tetra Pack saw its intimate relationship with Pointer as a model for key account relationships elsewhere. Aim of next proposal: develop an acceptable proposal that would stop the company’s decline in sales and margins. Three broad options: abandon enriched milk altogether; reintroduce enriched milk with a twist; develop a completely different proposal.