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April, 2008

BMJ

Mayr-Melnhof:
Europe’s No. 1 in Folding Cartons

By Reinhold C. Widmayer

Mayr-Melnhof Karton AG was founded 100 years ago and it is an Austrian success story. Mayr-Melnhof has selected Tobacco Packaging as one of the key growth areas and is supporting major multinational tobacco companies worldwide with local manufacturing facilities.

Today, the Mayr-Melnhof Group is comprised of two arms, the Cartonboard Division (MMK) and the Packaging Division (MMP). MMK is the world-leader in recycled fiber based cartonboard with a capacity of 1.7 mn tons, 9 mills in 6 countries, and close to 3,000 employees. MMP has managed to become the leader among Europe’s manufacturers of folding cartons with more than 650,000 tons converted in 27 sites in 11 countries. MMP counts 5,700 employees.

“Yes, Mayr-Melnhof Packaging is by far Europe’s No. 1 in folding cartons,” confirms Andreas Blaschke, member of the Executive Board, who sat down with Tobacco International in Vienna, Austria to discuss the latest news and trends in that segment of the industry. “Our yearly production volume is about three times larger than that of the nearest competitor in size.” And although MM Packaging is fairly new in the cigarette packaging business - the company started the commitment for the tobacco industry only in 1997 - it has quickly become a leader. “We have proved to our customers that we are 100% dedicated to their needs and that our know-how is second to none,” clarifies Mr. Blaschke. “Our revenues from tobacco packaging alone adds up to several hundred mn euros, which makes us the market leader also in that field in Europe.” Tobacco packaging accounts for a third of MMP’s activities. Food packaging is the second largest segment in sales, followed by packaging for detergents, non-food, confectionary, pharmaceutical products and others.

Printing and packaging, today, is a highly complex process - be it for cigarettes or other consumer goods. Technology cycles, especially in the printing sector turn faster than ever, the machinery is very expensive. Mr. Blaschke: “An eight color-printing machine costs at least e4 mn. And the trend in the tobacco industry is heading towards ten or 11 color machines. This requires to concentrate on packaging as a core business.” MM Packaging combines the know-how, technological strength and project handling competence of this network to create a powerful production tool especially for the tobacco industry. MM Packaging is the first European tobacco packaging specialist that offers all three printing technologies: Offset, Flexo, and Gravure. It is offering all relevant finishing technologies, local pre-print capacity, a wide network of printing facilities, plus the backup capacities of the whole MM network for 100% supply chain security.

MM Packaging is growing at a fast pace. Only a few months ago, it has acquired a state-of-the-art rotogravure operation of Field Packaging in Bremen, a company of the Chesapeake Corporation (US). The site specializes in the production of cigarette packaging and high-grade folding cartons. This facility constitutes a demand and future oriented addition to the existing rotogravure capacities of MM Packaging in Western Europe. Further acquisitions have been made in Tunisia, Jordan, Turkey, and Russia in the past three years. “We clearly focus on our growth in the East,” Mr. Blaschke explains. “In particular, we will concentrate our efforts on further developing our market position in Russia, which I believe has high potential for us. In addition to our two sites presently in operation we expect to have more sites in Russia in the years to come.” According to Mr. Blaschke, Mayr-Melnhof also has its sights on ME-NA, the Middle East-North Africa region. “There, we see similar conditions to Eastern Europe ten years ago … a young population with a relatively high standard of education, a rising spending power and the ambition to reproduce Eastern Europe’s success.” The area wide presence is an important sales pitch for MM Packaging’s clients, such as Philip Morris, JTI, Imperial Tobacco, Unilever, Nestle etc. “These multinationals like working with us because we cover all of Europe and beyond.”

One major market trend in cigarette packaging is the discontinuation of bundling papers with the alternative of transparent films having an impact on the volumes of printed paper material. Mainly cartons of cigarettes sold at retailers are wrapped in transparents, whereas cartons for duty-free sales remain unchanged. Another drastic change in the business will be the pictorial warning labels expected to become mandatory in Europe. Mr. Blaschke: “We are preparing for this fast. Just recently we installed a ten-color offset machine in Trier, Germany. We also upgraded some gravure machines for ten-color-print. Everybody is expecting the legal requirements to be enacted, soon.” The current non-uniform laws in European countries in addition to the increasing diversity of brands result in small batch sizes, which increase production costs and even lead to a shortage of availability of certain brands last year in Europe.

The packaging industry is still involved in anti-counterfeiting measures but the focus of the activities of the tobacco industry in now on extirpating counterfeiting by controlling the distribution of base products such as acetate, which is needed to produce filter materials.

As the consolidation of the tobacco industries continues, MMP follows its customers and drives growth in and beyond Europe steadily building up its global foot-print.


Tobacco International - April, 2008

Essentra


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